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U.S. Department of State 
Russia Country Commercial Guide 
Office of the Coordinator for Business Affairs 
 
 
 
                 COUNTRY COMMERCIAL GUIDE - RUSSIA 
                               FY 1996 
 
 
 
U.S. EMBASSY MOSCOW 
JUNE 30, 1995 
 
 
 
                       Table of Contents 
 
 
I.     Executive Summary 
II.    Economic Trends and Outlook 
III.   Political Environment 
IV.    Marketing U.S. Products and Services 
V.     Leading Sectors for U.S. Exports and Investment 
VI.    Trade Regulations and Standards 
VII.   Investment 
VIII.  Trade and Project Financing 
IX.    Business Travel 
 
X.                     APPENDICES 
 
A.     Country Data 
B.     Domestic Economy 
C.     Trade 
D.     Investment Statistics 
E.     U.S. and Country Contacts 
F.     Market Research 
G.     Trade Event Schedule 
 
 
This Country Commercial Guide (CCG) presents a comprehensive look at 
Russia's commercial environment through economic, political and market 
analyses.   
 
The CCGs were established by recommendation of the Trade Promotion 
Coordinating Committee (TPCC), a multi-agency task force, to consolidate 
various reporting documents prepared for the U.S. business community.  
Country Commercial Guides are prepared annually at U.S. Embassies 
through the combined efforts of several U.S. government agencies.  
 
I. EXECUTIVE SUMMARY 
 
Overview of Import Market 
 
A country of 150 million-plus people with tremendous natural and human 
resources is not a market which U.S. business can afford to neglect for 
long.  Russian demand is present across the board from consumer goods to 
capital equipment.  Foreigners, foreign products, and foreign ideas are 
now common in Russia today - a sharp contrast from a few years ago.  
U.S.-Russian trade has increased significantly.  Two-way merchandise 
trade with Russia in 1994 was a record $5.9 billion and U.S. exports in 
the first quarter of 1995 increased 9.3% over the same period in 1994.  
U.S. imports from Russia increased 125% over the same period in 1994.   
There are no significant legal barriers to the import market, but there 
are a number of factors which discourage trade. 
 
Brief Synopsis of Commercial Environment 
 
The Russian Federation is currently a country in economic, political and 
social transition of comparable scope and consequence to the fall of the 
Tsarist regime in the early part of the 20th century.  The duration and 
final outcome of this process are unknown.  As a result, uncertainty, 
high risk, as well as great opportunity, characterize the commercial 
environment in Russia today.  Doing business in Russia is not for the 
timid, but for the bold.  Fees, import licenses, export licenses, and 
other government regulations are subject to frequent change - often 
without notice.  Taxes are continually in flux and are often applied not 
just to profits, but also to revenue, making business operations at 
times uneconomical.  A business legal system is lacking.  Contract law, 
commercial codes, and legal enforcement of private business agreements 
are almost non-existent.  An Executive-Parliament consensus seems to be 
gelling to proceed with market reforms, the liberalization of foreign 
trade rules and regulations and the reduction of some taxes.  This 
consensus will be essential for the commercial environment to stabilize 
and improve. 
 
Russian Business Attitude Toward the United States 
 
Russian firms and customers admire U.S. technology and know-how and 
generally want to do business with U.S. companies.  In the Russian Far 
East, a strong U.S. commercial presence is viewed as a positive 
counterbalance to other regional economic powers. 
 
Major Business Opportunities 
 
There are few products or services which are not in demand in Russia.  A 
wide range of U.S. consumer goods manufacturers -  Procter & Gamble, 
Coca Cola, Mars - have already made Russia a major expansion market for 
their companies.  In many of the industrial sectors identified as 
priority by the Russian Government, such as oil and gas, 
telecommunications, aerospace, health care, mining and defense 
conversion, there are numerous commercial opportunities for U.S. 
exporters and investors.  Trade finance is a key to success in this 
market. 
 
Major Roadblocks to Doing Business 
 
U.S. and other foreign companies operating in this market encounter 
major difficulties to both trade and investment, including the 
following: 
 
-- ownership and jurisdictional disputes; 
-- financial illiquidity of a majority of Russian firms; 
-- lack of a normal commercial market; 
-- absence of a commercial legal framework; 
-- high cost and general difficulty of doing business; 
-- severe infrastructure problems (telecom, roads, 
-- banking system, ports, etc.) 
-- payments arrears and frozen accounts; 
-- frequent changes in government and firm personnel; 
-- high taxes which frequently change; 
-- frequent changes in the import and export regime; 
-- lack of systematic and accessible credit information; 
-- mounting crime and corruption 
 
Notwithstanding all of the above, business is being conducted.  U.S. 
firms are exporting and investing.  Activity at the microeconomic level 
is vibrant, with new goods and services appearing on the Russian market 
almost daily.  The number of U.S. firms opening in Russia is expanding 
and those with the right product or service, the right local contacts, 
business associates and street smarts are making money. 
 
Nature of Local and Third-Country Competition 
 
Western European firms, particularly those from Germany, Italy, Austria, 
France and the United Kingdom offer U.S. business the most competition.  
Direct flights by Lufthansa from Frankfurt to the Russian Urals 
(Yekaterinburg) and to Siberia (Novosibirsk) have stimulated western 
European business interest in these parts of Russia.  Scandinavian firms 
are particularly active in northwest Russia and Chinese, Korean and 
Japanese firms are very aggressive in the Russian Far East.  Better 
credit terms often give the advantage to western European firms. 
 
The opening of U.S. Consulates General in Vladivostok in the Russian Far 
East and in Yekaterinburg in the Urals is  facilitating  U.S. firms' 
ability to do business in other than the Moscow and St. Petersburg 
regions and helps balance the growing Chinese, Japanese and Korean 
commercial influence in the Far East and the German strength in central 
Russia.  American Business Centers operating in St. Petersburg, 
Vladivostok, Khabarovsk, Novosibirsk, Yekaterinburg, Nizhnevartovsk, 
Nizhny Novgorod, Volgograd, and Chelyabinsk (and shortly in Yuzhno-
Sakhalinsk) have been of significant assistance to U.S. companies 
exploring the tremendous commercial opportunities in the Russian 
hinterlands.  Growing commercial air connections are making it easier to 
reach the Russian Far East:  Korean Airline and Alaska Airlines provide 
weekly service to cities in the region. 
 
Country Commercial Guides are available on the National Trade Data Bank 
on CD-ROM or through the Internet.  Please contact STAT-USA at 1-800-
STAT-USA for more information.  To locate Country Commercial Guides via 
the Internet, please use the following World Wide Web address:  
WWW.STAT-USA.GOV.  CCGs can also be ordered in hard copy or on diskette 
from the National Technical Information Service (NTIS) at 1-800-553-
NTIS.   
 
II.  ECONOMIC TRENDS AND OUTLOOK 
 
Major Trends and Outlook 
 
On March 10, 1995, the Government and Central Bank of Russia announced a 
bold economic stabilization program for 1995 -- a major breakthrough on 
Russia's path to economic reform.  Russia's economic team, headed by 
First Deputy Prime Minister Chubays and supported by the President and 
Prime Minister, worked for months with the IMF and the Parliament to put 
together an economic policy agenda consisting of a tight budget, 
restrictive monetary policy, and trade and energy sector liberalization.  
The government's stabilization program formed the basis for a $6.5 
billion standby credit from the IMF, scheduled for monthly disbursement 
through 1995 and the early part of 1996. 
 
After four years of large annual declines in Gross Domestic Product 
(GDP) and industrial production, the Russian economy is showing signs of 
stabilizing in 1995.  Real GDP dropped 15 percent in 1994 over 1993, but 
has slowed its decline considerably in the early part of 1995.  Real 
industrial output, while continuing to decline in annual average terms 
(down 21 percent in 1994 over 1993), stopped falling from the summer of 
1994, and certain sectors show signs of recovery for the first time 
since the beginning of market reforms.  Official statistics indicate 
steady growth in trade and services, sectors that were admittedly 
underdeveloped under the centrally planned economy of the former Soviet 
Union.  By mid-year 1995, services grew to comprise 50 percent of GDP, 
while manufacturing shrunk in GDP terms to less than 44 percent. 
 
Unemployment has risen steadily over the past few years, from nearly 
zero to 7.5 percent of the workforce in June 1995.  In certain depressed 
regions and sectors, unemployment is much higher, in contrast to the 
very low unemployment rate in Moscow.  Experts estimate that another 7 
percent of the workforce is currently underemployed -- on unlimited 
unpaid furlough or working only part time.  Studies indicate that many 
of the underemployed are content to keep their wage positions in order 
to receive the social benefits provided by the enterprise, while 
supplementing their income by growing food at home or working in the 
informal economy.  Because most of Russia's large industrial enterprises 
continue to employ too many workers, experts expect unemployment to 
continue to increase steadily.  Average wages reached 385,000 rubles per 
month in April 1995 (about $75 a month at the end-April exchange rate).  
Real average wages (adjusted for inflation) continued their general 
decline in 1994 and early 1995.  (In the first four months of 1995 real 
average wages posted a 29 percent decline over the same period in 1994.)  
In contrast, real average income increased significantly in 1994 -- 
another indication that many Russians earned extra income outside of 
their regular jobs -- before falling off somewhat in early 1995.  (In 
the first four months of 1995, real average income declined 8 percent 
over the same period in 1994.)   
 
Inflation has been falling since the beginning of 1995, in line with the 
government's commitment to non-inflationary financing of the federal 
deficit.  Annual inflation (CPI) ran at 303 percent in 1994, down 
substantially from the almost 900 percent annual inflation registered in 
1993.  Average monthly inflation in 1995 has fallen from a peak of 18 
percent in January to just under 8 percent in May, and experts expect 
the trend to continue through the end of the year. 
 
The ruble abruptly broke the predictable but slow decline which marked 
the first eight months of 1994 with a 22 percent one-day drop against 
the dollar on October 11, also called "Black Tuesday".  Within 48 hours 
the ruble regained its pre-fall level of approximately 3,000 rubles to 
the dollar.  Repercussions from Black Tuesday were harsh and Central 
Bank Chairman Gerashchenko, Deputy Prime Minister Shokhin, Acting 
Finance Minister Dubinin and the head of the Federal Service for 
Currency and Export Control were all eventually removed from their 
posts.  Official inquiries found that lax credit policy, combined with 
poor management of currency intervention by the Central Bank, 
contributed to the ruble's fall.  In 1995, after three months of steady 
decline in line with inflation, the ruble stabilized in mid-April in a 
narrow band around 5,000 rubles to the dollar and appreciated 10 percent 
as of the print date of this publication in mid-June 1995. 
 
Interest rates, both the Central Bank's official discount rate and 3-
month interbank market rates, fell for the first nine months of 1994, 
but rose abruptly in response to the ruble's fall on Black Tuesday.  
Respectively, these rates ended 1994 at 200 and 174 percent (in simple 
annual terms).  In April 1995, the Central Bank lowered the discount 
rate five percentage points to 195 percent, while 3-month interbank 
market rates have fallen dramatically, and as of mid-June they were just 
under 95 percent.   
 
Principal Growth Sectors 
 
Overall Russian industrial production, after experiencing a free fall 
for the past four years, is showing signs of having bottomed out.  
Consensus data indicate that Russia's real seasonally adjusted 
industrial production has enjoyed relative stabilization in the ten 
months leading up to June 1995.  At the sectoral level, clear winners 
and losers are emerging, but the overall picture suggests that the 
continuing downturn in the textile, consumer goods, and state defense 
sectors is more than balanced by output increases in the chemical, non-
ferrous metal, machine building, construction and other sectors.   
 
By far the largest growth area in 1994 came in the 
chemical/petrochemical and non-ferrous metals industries, each of which 
have benefited from strong global demand and relative price advantage.  
Soda ash output grew by nearly 19 percent, mineral fertilizer output by 
16 percent, sulfuric acid output by 12 percent, and synthetic ammonia 
output by 2 percent in the fourth quarter of 1994 over 1993.  Among non-
ferrous metals, magnesium and magnesium alloys posted modest gains in 
1994, and nickel skyrocketed - up 46 percent in the fourth quarter of 
1994 over the same period in 1993. 
 
Between the big winners and big losers are a group of industries that 
show some tentative signs of strengthening.  The timber and wood 
processing industry was hit hard by the transition to a market economy, 
registering an initial drop (from January 1990 to June 1994) of 70 
percent - but is showing signs of limited recovery, with commercial pulp 
posting a 10 percent increase in output in the fourth quarter of 1994 
over fourth quarter 1993.  (The timber industry as a whole still suffers 
from the high transportation costs associated with bringing product from 
forest to market.)  While the food processing industry as a whole is 
still in decline, vegetable oil production posted a slight increase in 
the fourth quarter of 1994 over the same period of 1993, mostly due to 
strong domestic demand.  It is possible as well that growth in the food 
processing industry is taking place in smaller privatized businesses 
(local bakeries, etc.,) which are more difficult for the official 
statistics agency to capture.  Ferrous metal production is still in 
decline overall, but losses in the domestic market have been nearly 
balanced by strong world demand.  This is noticeable in pig iron, which 
posted a 1.6 percent gain in the fourth quarter 1994 output over fourth 
quarter 1993, and rolled metal, output of which largely stabilized in 
the latter half of 1994 relative to 1993.  Likewise, the machine 
building sector showed early signs of recovery in the second half of 
1994, with tractor production up slightly in the fourth quarter of 1994 
over the same period in 1993.  
 
However, trends in the industrial sector tell only part of the story in 
Russia.  The retail/wholesale trade and service sectors, which together 
made up more than half of GDP in 1994 are thriving.  Small independent 
trading establishments have emerged (usually in the form of kiosks) all 
over Russia's major cities, selling a variety of domestically produced 
and imported goods.  Likewise, the service sector, long underdeveloped 
under the Soviet system, is burgeoning, especially in the major 
metropolitan areas.  Along with the introduction of major western 
accounting and legal firms to Russia's corporate make up are small 
service providers, who with informal traders make up the bulk of the 
cash or "gray" economy.    
 
Government Role in the Economy 
 
Privatization has made great strides in Russia.  According to the 
government, as a result of small-scale, voucher and post-voucher  (cash) 
privatization, over 110,000 enterprises have been privatized in whole or 
in part.  More than 80 percent of Russia's industrial workers are now 
working in privatized firms.  The start of the central government's 
portion of the (cash) privatization program, under which the government 
will sell many of its retained holdings in privatized firms as well as 
the most of the enterprises which have not yet been privatized, has been 
delayed repeatedly.  However, this program has made substantial progress 
in some of Russia's regions, including sale of the land on which they 
are situated to privatized firms, a major innovation President Yeltsin 
included in his July 1994 decree on cash privatization.  
 
In addition, the Federal Bankruptcy Agency (FBA) has begun to implement 
President Yeltsin's decision of May 1994 to declare insolvent state 
firms bankrupt.  The FBA completed the first reorganization and sale of 
an insolvent state firm in November 1994.  The FBA is processing perhaps 
300 administrative actions against insolvent state firms as well as 
having initiated another 300 actions in Russia's commercial courts.  
Although it is too soon to judge how sweeping the FBA's actions against 
the over 2,000 state firms it has found to be insolvent, this process is 
clearly gaining momentum. 
 
Roughly 85 percent of wholesale and retail prices were liberalized by 
the end of 1992.  Together with a virtually unrestricted import regime, 
price liberalization ended shortages of consumer goods through much of 
Russia.  A few prices remain regulated by the government, among them 
rail transport and housing.  Energy prices remained controlled at the 
wholesale level, with domestic prices substantially below international 
levels.   
 
Balance of Payments Situation 
 
Russia's current account (after rescheduling) registered a surplus for 
the second year in a row in 1994, though the level was much lower at USD 
1.4 billion.  The 1994 surplus reflected a USD 12.3 billion merchandise 
trade surplus, offset by a USD 10.9 billion deficit in non-merchandise 
trade.  Total trade expanded by 9 percent over 1993 to USD 83.7 billion, 
after contracting slightly in 1993 over 1992.  Russia's non-merchandise 
trade deficit increased sharply in 1994 over 1993, led by an increase in 
the net services deficit to USD 6.8 billion.  In 1994, Russia sustained 
a capital account deficit in excess of USD 20 billion for the second 
year in a row, including USD 14 billion in principal payments.  Net 
international reserves (NIR) of the Russian monetary authorities ended 
the year down USD 1.8 billion at USD 4 billion, having peaked in the 
second quarter at USD 8 billion and then fallen as the ruble came under 
pressure in the third and fourth quarters.  Gold reserves also fell by 
USD 500 million to USD 2.6 billion by year end.    
 
Capital flight continues to plague the Russian economy, although 
official data suggest that the rate of capital flight has slowed 
somewhat since its peak in 1992.  Opinions vary greatly, but a realistic 
assessment would place capital flight at close to USD 17 billion in 
1994, and would note that little of this is related to criminal 
activity, but represents a legitimate desire for safe havens abroad for 
foreign exchange earnings.  
 
The U.S. and Russia signed a $900 million bilateral debt rescheduling 
agreement on October 25, 1994, formally putting into effect the Paris 
Club rescheduling accord reached the previous June with Russia's 
official creditors.  In it, the Paris Club agreed to reschedule 7 
billion dollars in official debt owed by Russia in 1994, thus easing its 
repayment burden.  In June 1995, the Paris Club reached agreement with 
the Russian government to reschedule 6.3 billion dollars in Russian debt 
payments due this year and to hold talks with Moscow on rescheduling 
Russian debts inherited from the former Soviet Union.  The London Club 
of commercial bank creditors is expected to reach agreement with the 
Russian government in mid-1995, and $500 million in payments have been 
already put into trust.   
 
Infrastructure Situation 
 
Although Russia boasts of an extensive transportation infrastructure 
built during the Communist era, its communications infrastructure leaves 
much to be desired.  During the Communist era, Russia invested heavily 
in building transportation infrastructure:  roads, railways, airports, 
and ports.  During later years, the government had difficulty 
maintaining many of those facilities.  In the breakup of the Soviet 
Union, Russia lost a number of key ports, which has led to overcrowding  
at the St. Petersburg port.  Some western companies are finding it 
easier to ship goods to Helsinki and then transport them into Russia by 
truck.  In addition, SeaLand Service operates a container service out of 
the Far East port of Vostochniy to Moscow, with onward links to Western 
Europe.  Russian Far East ports (Vladivostok, Vostochniy, Nakhodka, and 
others) now handle more than a third of all cargo and are particularly 
important for imports/exports to Siberia and the Russian Far East.  
 
III.  POLITICAL ENVIRONMENT 
 
Nature of Bilateral Relationship with the United States 
 
With the end of the Cold War and the reemergence of a Russian State, 
U.S. relations with Moscow have evolved rapidly over the last two and a 
half years.  At meetings in Vancouver, Tokyo and Moscow, Presidents 
Clinton and Yeltsin laid the basis for a U.S.-Russian partnership.  Over 
the last two and  a half years we have made great strides forward in a 
number of important fields -- particularly arms control.  While 
disagreements persist on individual issues, the U.S. and Russia now 
consult closely on major issues of mutual and international interest. 
 
The United States firmly supports Russia's development into a 
democratic/market society, and Russia's further integration into the 
international community.  The United States has made available 
substantial bilateral assistance -- and has led international aid 
efforts.  The United States has also taken steps to clear from the books 
Cold War era legislation limiting contacts with Russia.  On April 2, 
COCOM ceased to exist, and we are currently working with our partners to 
form a new international export regime which will not be directed 
against Russia. 
 
Major Political Issues Affecting Business Climate 
 
One of the most pressing issues which defines the business climate in 
Russia is the lack of legislation in most areas of economic activity.  
This is due primarily to the fact that there is no political consensus 
in the State Duma and the Government on how business activities should 
be regulated, whether private business should be promoted, and the role 
of foreign investment in Russian society.  Not only does this make 
taxation and business regulation an unpredictable prospect at best, 
there is no judicial basis for resolution of disputes between 
individuals and/or companies.  In the absence of legislation, many 
government decisions affecting business have been taken by executive 
fiat -- diminishing the prospects for their legitimacy and 
effectiveness, and often leading to inconsistent policy. 
 
Even more telling of the business climate is the ever-increasing wave of 
crime which has swept over Russia with the passing of Soviet control.  
Police are underpaid, outnumbered and outgunned.  Individual and 
organized criminal elements flourish.  Especially problematic is 
racketeering, which raises costs for local and foreign businesses alike.  
 
Protectionist elements in the Federal Assembly have raised the 
possibility of retaining certain elements of Soviet policy towards 
foreign investors.  This might take the form of limits on foreign share 
holdings, limitations on property ownership, or an increased tax burden 
on foreign businesses.  This pressure for greater protectionism reflects 
the widespread perception that foreign business is taking advantage of 
the current unstable situation to make quick money, and these proposals 
could make foreign investors wary of further involvement. 
 
Brief Synopsis of Political System, Schedule for Elections, and 
Orientation of Major Political Parties 
 
As outlined in the new constitution adopted in December 1993, the 
Russian Federation is governed by a political system modeled after many 
in the West.  The federal system is composed of three branches:  
executive, legislative and judicial.  The Federation is composed of 89 
"subjects," which include regions, ethnically-based autonomous 
republics, territories and the cities of Moscow and St. Petersburg.  
These "subjects" are granted some autonomy over internal economic and 
political issues, but there is considerable disagreement over how much 
authority they are to share with Moscow. 
 
Executive Branch:  Under the constitution, the executive branch is led 
by the President, who is elected for a five-year term.  President 
Yeltsin's term expires in 1996.  He has the right to choose the Prime 
Minister (currently Viktor Chernomyrdin), with the approval of the 
legislature.  The Prime Minister in turn appoints ministers, who are 
responsible for the execution of legislation and decrees in their 
respective fields. 
 
Judicial Branch:  The judicial branch comprises the Constitutional 
Court, which reviews the constitutionality of federal legislation; the 
Supreme Court, which is the highest civil and criminal judiciary body; 
and the Supreme Arbitration Court which resolves economic disputes 
between subjects of the Federation.  The Constitutional Court held its 
first session in the spring of 1995. 
 
Legislative Branch:  The legislative branch is composed of a two-chamber 
federal assembly, elected for the first time on December 12, 1993.  The 
Upper House, the Federation Council, consists of two representatives 
from each subject of the Russian Federation.  The Federation Council 
passes decrees on federation disputes and reviews legislation passed by 
the Lower House, including the federal budget.  The Lower House, or 
State Duma, is made up of 450 deputies, one-half selected on the basis 
of geographic districts and one-half on the basis of party lists.  The 
Duma passes most federal laws.  Duma members are elected to four-year 
terms (after an initial two-year term which began in 1994).  The next 
legislative elections are scheduled for December 1995.  
 
Political Parties:  There are over twenty parties and fractions 
represented in the Parliament.  Pro-reform forces in the Federal 
Assembly are represented most notably by Yegor Gaydar's "Russia's 
Choice," generally considered the strongest advocate of market reform.  
Grigoriy Yavlinskiy's "Yabloko" party also supports free markets, but is 
more inclined to use government funds to ensure a strong social safety 
net.  Sergey Shakhray's "Party of Russian Unity and Concord" is quite 
progressive but more reserved in its support of radical economic reform, 
supporting a greater role for the local regions as well as a mixed 
economy.  "Centrist" groups pushing for a slower approach to reform 
include the "New Regional Policy," a loose grouping of centrist 
politicians; "Women of Russia;" and "The Liberal Democratic December 12 
Union," as well as many independent deputies.  There is also a wide 
range of parties standing firmly in opposition to market reforms.  The 
"Russian Liberal Democratic Party" is a radical right-wing nationalist 
party led by Vladimir Zhirinovskiy.  Lapshin's "Agrarian Party" 
represents Russia's agricultural establishment and favors continued 
government support for the agricultural sector.  The reconstituted 
Communist Party is headed by Gennadiy Zyuganov.  The anti-government 
parties hold a majority on most issues.  In the spring of 1995, 
President Yeltsin established two "centrist" movements which he hopes 
will be a broad-based coalition behind his policies.  The "Russia is Our 
Home" movement led by Prime Minister Chernomyrdin comprises center-right 
political leaders and factions, leading commercial structures, and many 
regional governors.  The center-left movement led by Duma Speaker Ivan 
Rybkin includes leading social democratic political leaders and 
movements.  Chernomyrdin's movement is far better organized and well-
financed than Rybkin's at this time.    
 
IV.  MARKETING U.S. PRODUCTS AND SERVICES 
 
As Russia continues to make substantial progress toward becoming a 
market economy, the process of selling goods and services in Russia is 
becoming increasingly market-oriented.  The stereotype of Russia as a 
homogeneous seller's market dominated by state-owned stores and 
unsophisticated customers is long gone.  Factors such as finding the 
proper sales channel and customer segment, coping with domestic and 
import competition, responding to consumer preferences, and pricing 
products to the market -- i.e. the same factors that U.S. companies deal 
with at home and in "mature" export markets such as Canada and Western 
Europe -- are rapidly coming to the fore.  However, it must be noted 
that the Russian market still displays unique characteristics that 
require special approaches and methods by would-be foreign suppliers. 
 
Distribution and Sales Channels 
 
A key initial decision for a U.S. firm seeking to introduce its product 
into the Russian market is the choice of a distribution/sales channel.  
Increasingly, such channels in Russia are diversifying and becoming 
product and customer-specific.  The following illustrates possible 
options for marketing and distributing U.S. goods and services in 
Russia. 
 
Direct sales to end-users is currently the most popular approach for 
most U.S. suppliers of capital goods and industrial equipment.  Russian 
end-users of these types of products are predominately large state-owned 
or recently privatized enterprises.  Such enterprises are typically 
located in and around major cities although many are in more remote, 
sparsely populated areas throughout the country. 
 
U.S. firms marketing products and services to large Russian enterprises 
typically operate from a representative office located in a major 
Russian city.  The capital city of Moscow is by far the most popular 
location for representative offices, although the number of U.S. firms 
located in St. Petersburg and Vladivostok, for example, is growing.  Due 
to Russia's large size and the geographic dispersion of buyers in this 
sector, frequent air travel by sales representatives to visit 
prospective buyers is a necessity.  
 
It is important to emphasize that while U.S. suppliers of capital goods 
and industrial equipment can and do use Moscow as a base of operations, 
the great majority of sales are negotiated and transacted "in the 
field."  The number of potential buyers in this sector that are located 
in Moscow is very small compared to Russia's major industrial zones 
(i.e. the Urals region, Siberia, the Northwest/St. Petersburg region and 
the Far East).  Moreover, Russian industrial enterprises are now largely 
independent of central government control and usually do not have 
permanent representatives in Moscow.  Simply put, selling capital goods 
and equipment in Russia without leaving Moscow is no longer a 
possibility. 
 
Some U.S. suppliers in this sector, especially small and medium-sized 
firms seeking a cost-effective alternative to establishing a 
representative office in Russia, utilize the services of intermediary 
organizations such as commission agents, export management companies and 
export trading companies.  Such intermediaries, often possessing their 
own in-country office and sales personnel, can perform a variety of 
marketing services on behalf of U.S. equipment suppliers such as making 
sales calls on prospective end-users, exhibiting the supplier's products 
at trade exhibitions and negotiating sales contracts.   
 
Use of Agents/Distributors; Finding a Partner 
 
Although Russia still lags behind most western countries in terms of 
well-developed distribution networks, U.S. suppliers of consumer goods 
and services and smaller-ticket equipment items are increasingly able to 
penetrate the Russian market through local distributors.  The importance 
of Russia's fledgling distribution networks is magnified by the ongoing 
privatization of the Russian retail sector, which has resulted in a 
rapid proliferation and diversification of retail outlets. 
 
In a few product categories (i.e. apparel, packaged foods, alcoholic 
beverages, office equipment and personal computers), foreign suppliers 
can choose from a small but growing number of existing Russian 
distributors.  These Russian middlemen firms can help the foreign 
supplier by placing its products on store shelves, handling customs and 
transportation matters and even conducting advertising campaigns.  Such 
existing distributors can be contacted at trade exhibitions, through 
trade publications and Commercial News USA, and through the Commerce 
Department's Agent Distributor Search service.  However, it should be 
kept in mind that many of these recently-formed Russian distributors 
have comparatively short track records in the distribution business, are 
small-volume operations, and their experience is often limited to the 
main cities of Moscow and St. Petersburg, or other regional centers. 
 
Because of these limitations, many U.S. suppliers have chosen to market 
their products in Russia through authorized distributorships which they 
create from scratch.  While obviously this approach entails greater 
expense than utilizing existing distribution networks, it can provide 
valuable protection for the U.S. supplier's product quality and 
corporate image.  It also allows the supplier to establish a 
distribution network capable of handling larger product volumes, which 
lowers per unit costs and increases market coverage.  Moreover, it is 
worth noting that this approach has proven especially popular among 
foreign service providers in Russia (e.g. insurance, long distance and 
cellular telephone services, etc.). 
 
The first step in creating a Russian distribution network is often for 
the U.S. supplier to establish a representative office in Russia from 
which it can acquaint itself with the domestic market as well as build 
and supervise its local distribution network.  The second step is to 
identify Russian firms capable of acting as distributors for an American 
product.  Many U.S. firms seek out Russian companies with experience in 
manufacturing, handling or servicing Russian products similar to those 
of the U.S. firm -- for example, a Russian assembler of personal 
computers that is interested in distributing American-made PCs.  Such 
contacts can be made at trade exhibitions, by working through a Commerce 
Department-supported Consortium of American Businesses in the Newly 
Independent States (CABNIS) and through the Commerce Department's Agent 
Distributor Service and Gold Key Service.  
 
The final step involves the provision by the U.S. firm of considerable 
hands-on training for its distributor, as well as supervision of the 
distributor thereafter, to ensure that the Russian distributor upholds 
the quality standards of the supplier and the product and that it 
effectively reaches the market segment targeted by the supplier.  Often, 
U.S. firms provide such training by bringing new distributors to their 
American headquarters for "internships" in marketing and corporate 
culture.  The Commerce Department's Special American Business Internship 
Training Program (SABIT) can help U.S. firms defray the cost of 
providing such internships for Russian business partners. 
 
Franchised Dealerships and Direct Marketing 
 
Foreign firms in certain sectors (i.e. automobiles, home electronics and 
fast food) have achieved success in the Russian market by setting up 
franchised dealerships with Russian partners.  Similarly, a handful of 
foreign firms have established wholly-owned retail outlets in Russia.  
This latter approach is often used by foreign suppliers of luxury or 
high-value-added consumer items (e.g. cosmetics, perfumes, fine china) 
as an initial market entry tactic which will be abandoned as soon as 
Russian retail establishments suitable to the supplier's product appear.   
 
While franchising and direct retailing are comparatively expensive and 
time-consuming undertakings (involving, for example, the difficult 
process of locating, leasing and renovating retail space in a major 
Russian city), they provide the U.S. supplier with the highest possible 
control over the marketing of its goods and services in Russia. 
 
Joint Ventures/Licensing 
 
A small but growing number of foreign firms have entered into joint 
venture arrangements in Russia for the manufacture and sale of finished 
goods in the domestic market.  To date, examples of products produced 
and distributed successfully by U.S.-Russian joint ventures include soft 
drinks, ice cream, cigarettes, computer hardware and software, and 
elevators.   
 
Firms supplying the Russian market through joint ventures seek to take 
advantage of lower domestic factor costs, make use of the Russian 
partner's knowledge of the domestic market, and circumvent high import 
tariffs on finished goods.  Uncertainty regarding Russia's legal climate 
for foreign investment is a key factor preventing faster development of 
joint ventures as a form of market entry by U.S. suppliers.  
Additionally, U.S. firms often have difficulty finding viable Russian 
partners for joint venture manufacturing because few Russian enterprises 
are experienced in producing and distributing Western-standard products. 
 
For this latter reason, joint venture projects undertaken in Russia are 
frequently developed in a multi-phased manner.  For example, the initial 
phase of the project is often limited to the packaging of imported 
finished goods on the premises of the Russian partner and subsequent 
distribution of the product.  After a period of successful operation in 
this mode, the project then moves on to assembly and packaging of 
imported components.  With continued success, the project may progress 
to the final stage of utilizing a large percentage of locally-sourced 
raw materials in the production process. 
 
At present, production of U.S. products in Russia under license is 
relatively rare. 
 
Steps to Establishing an Office 
 
As mentioned above, foreign firms often conduct marketing activities in 
Russia through representative offices.  Under Russian law, foreign 
representative offices are not considered to be Russian legal entities; 
they can conduct marketing activities and sign contracts, but cannot 
engage in taxable commercial activities. 
 
Representative offices can be in two forms: accredited or non-
accredited.  Accreditation is the more time-consuming and expensive 
approach, and it requires the foreign firm to have a Russian Government 
sponsoring organization (usually the Ministry of Foreign Economic 
Relations or an industry-specific ministry).  However, accreditation 
holds certain advantages in that the accrediting sponsor can issue 
invitations to foreign personnel visiting the representative office 
(which are necessary to obtain Russian business visas) and can assist 
the office in making business contacts. 
 
Because accreditation involves the submission of various legal and 
financial documents to the Russian Government sponsor, most foreign 
firms seeking accreditation in Russia retain a local attorney to handle 
the application for them. 
 
Both accredited and non-accredited offices must file a registration form 
with the Russian Tax Inspectorate within one month of establishment of 
the office.   
 
Selling Factors/Techniques 
 
Two related keys to success in supplying the Russian market are (1) 
focusing on buyers with regular export earnings or good cash flow and 
(2) not overlooking non-traditional customers.  
 
U.S. suppliers of many types of products, including capital goods and 
industrial equipment, achieve success by targeting Russian enterprises 
that export a significant portion of their production for hard currency 
or generate good cash flow as a result of domestic sales.  A slightly 
different but equally successful version of this approach is to target 
regional Russian government authorities located in natural resource-rich 
areas of the country, as these authorities often receive a share of the 
export revenues generated by enterprises under their jurisdiction. 
 
For example, U.S. firms frequently report successful sales of small to 
medium-sized lots of personal computers, office equipment and consumer 
goods (e.g. home appliances and white goods, sporting goods, 
automobiles, furniture) to regional and local government administrations 
or large Russian enterprises located in oil-producing Western Siberia 
and Tatarstan and diamond-rich Yakutia.  These agencies use these 
products for a variety of purposes, including outfitting their own 
offices, supplying population centers in remote areas of the country and 
even distributing them to their employees as incentive awards.   
 
Savvy U.S. firms also watch for announcements of major modernization or 
expansion projects by Russian enterprises.  Often, the Russian 
Government helps the affected enterprise pay for the necessary equipment 
imports by providing a special allotment of financing, by temporarily 
waiving tariffs and quotas on the enterprise's exports, or by 
temporarily exempting the enterprise from the legal requirement to 
resell a portion of its hard currency export proceeds to the Russian 
Central Bank. 
 
Finally, development projects in Russia financed by the World Bank, the 
European Bank for Reconstruction and Development and the U.S. Agency for 
International Development frequently involve competitive tenders for the 
procurement of imported goods and services.  
 
U.S. firms also successfully sell for rubles.  Some denominate their 
sales contracts in dollars, but accept rubles as payment.  The rubles 
are then converted on the Moscow Interbank Currency Exchange or some 
other currency exchange in Russia by the seller's bank, or through 
interbank mechanisms, and then wired to the seller's offshore bank.  
Because of the delay between contract signing and receipt of dollar 
payment offshore, there is usually a slight difference between the 
contract price and the payment received.  The purchaser is notified of 
the difference, the same bank transfer process occurs, or the seller 
accepts the small amount of rubles for local costs and then the product 
is shipped. 
 
Advertising and Trade Promotion 
 
As the Russian market grows more competitive and sophisticated, more and 
more foreign firms are undertaking domestic advertising as an integral 
component of their marketing strategy.  Advertising through television, 
radio, print and billboard media has become especially characteristic of 
the consumer goods and financial services markets.  As one would expect, 
the number of western as well as Russian advertising agencies active in 
Russia is growing rapidly. 
 
At present, the legal/regulatory environment for advertising in Russia 
is not well developed.  The Russian parliament dissolved by President 
Yeltsin in October 1993 had passed a law banning all tobacco and alcohol 
advertising, but this law has never been enforced.  Russia's first 
comprehensive advertising law is now being formulated by the new Russian 
Parliament's information committee, but relatively little has been 
publicized about the content of this draft law or the timetable for its 
completion.  In response to several highly-publicized scandals involving 
Russian investment firms which embezzled money from investors through 
advertisements promising huge and quick returns, President Yeltsin 
signed in June 1994 a decree calling for stricter standards of "truth in 
advertising."  However, an assessment of this decree's impact on the 
local advertising market will be possible only after the publication of 
implementing regulations. 
 
Both foreign and domestic firms frequently advertise in commercially-
oriented newspapers and journals in Russia, with the following being the 
most popular: 
 
Deloviye Lyudi (monthly journal, Russian language) 
Izvestiya (daily paper, Russian language) 
Kommersant (daily paper, Russian language) 
Delovoy Mir (daily paper, Russian language) 
Ekonomika i Zhizn (weekly paper, Russian language) 
Business MN (weekly paper, Russian language) 
Moscow Times (daily paper, English language) 
Moscow Tribune (daily paper, English language) 
Moscow Business Guide (monthly business directory, 
  English language) 
Delovoi Petersburg (daily paper, Russian language) 
St. Petersburg Press (daily, English language) 
 
Trade exhibitions in Russia are a useful mechanism for U.S. suppliers to 
expand awareness of their product and meet potential buyers and 
distributors.  Moreover, U.S. consumer goods suppliers frequently make 
substantial off-the-floor sales at Russian trade exhibitions.  This 
appears to result from the fact that representatives of regional 
governments and state enterprises from remote, poorly-supplied areas of 
Russia often visit trade exhibitions in major cities in order to 
purchase stocks of consumer goods for their region or enterprises. 
 
Pricing Product 
 
It is difficult to generalize about the pricing of U.S. goods and 
services in the Russian market.  On the one hand, Russia's per capita 
income is lower than most western countries which would argue for 
pricing imported products toward the low end of the spectrum.  This is 
especially true for U.S. suppliers that seek to market their products to 
a broad spectrum of Russian society (e.g. candy, disposable shavers, 
cigarettes).   
 
On the other hand, downward pricing may not be appropriate for products 
(i.e. luxury automobiles) that target the fast-growing segment of 
Russian consumers who, due to their involvement in private business and 
entrepreneurial activities, possess significant discretionary incomes.  
In some cases, the relative lack of competition in the Russian market 
for certain products allows foreign suppliers to introduce new products 
at higher-end prices.  Moreover, Russia's relatively high import tariffs 
and 23 percent value-added-tax (VAT) put upward pressure on the prices 
of many imported goods.  At any rate, it is worth noting that with 
almost all prices in Russia now decontrolled and with inflation running 
at 7-8 percent per month, Russian consumers have grown somewhat 
accustomed, at least psychologically, to higher prices. 
 
When developing their pricing strategies, U.S. suppliers should also 
take note of the considerable regional segmentation of the Russian 
market.  While the market for a particular imported product in Moscow or 
St. Petersburg may be characterized by the availability of several 
competing import and domestic brands, heavy advertising, good consumer 
awareness and widespread price competition, the market for the same 
product in major regional cities such as Yekaterinburg or Novosibirsk 
may be completely different. 
 
Selling to the Government 
 
Despite the nearly complete disintegration of the former Soviet Union's 
centralized trading regime, Russian Government organizations (including 
central, regional and local authorities) are still potential customers 
for U.S. suppliers in certain instances.  For example, the Russian 
Ministry of Health and the country's more than 100 regional government 
administrations frequently make direct purchases of pharmaceuticals and 
medical equipment which they in turn distribute to hospitals, clinics 
and institutes under their jurisdiction.  Also, Russian Government 
ministries (or ministry-designated trading organizations) often act as 
purchasing agents for goods and services procured under official tenders 
financed by international development agencies (e.g. the World Bank, the 
European Bank for Reconstruction and Development).  However since local 
governments in general no longer receive substantial subsidies from the 
federal government they make purchasing decisions based on local factors 
and contacts.  Once again to take advantage of opportunities at the 
local and regional level companies must venture beyond Moscow. 
 
Protecting Your Product from IPR Infringement 
 
Russia has made progress in establishing the legal basis for protection 
of intellectual property rights.  Laws protecting patents, trademarks, 
integrated circuits and computer databases in Russia were adopted in 
late 1992, and a copyright law came into force in 1993.  Russia also 
subscribes to major international conventions and agreements on 
intellectual property. 
 
However, Russia's implementation and enforcement of laws protecting 
intellectual property have not kept pace with legislative developments.  
Piracy in computer software, motion pictures, videos, recorded music and 
proprietary-label clothing is pervasive, and foreign firms have 
experienced significant problems with patent infringement as well.  
Moreover, U.S. attorneys operating in Russia report that adjudication of 
IPR disputes in Russian courts is difficult due to the latter's lack of 
experience with these issues. 
 
Need for a Local Attorney 
 
Russia has yet to develop a codified commercial or tax code.  As a 
result, the great majority of commercial regulations are contained in 
thousands of individual presidential, governmental and ministerial 
decrees.  Often the relationship between these decrees and existing laws 
is overlapping, conflicting or unclear. 
 
While one of the key tasks before the newly-elected Russian Parliament 
and the Government of President Yeltsin is to develop a modern, codified 
body of business law, this will not be accomplished overnight.  
Therefore, for the foreseeable future U.S. firms operating in Russia 
should use the services of a local attorney for most legal transactions.  
The Consular section of the Embassy maintains and will make available 
upon request a list of local attorneys.     
 
V.  LEADING SECTORS FOR U.S. EXPORTS AND INVESTMENT 
 
Best Prospects for Non-Agricultural Goods and Services 
(figures are US$ millions, unless otherwise noted) 
 
1.  General Consumer Goods (GCG) 
 
Russia has become a fabulous market for U.S. consumer goods.  Russian 
consumers, accustomed to Soviet era shoddy goods and shortages, have had 
a long pent-up demand for Western luxuries.  As Western consumer goods 
reached Moscow and St. Petersburg markets, well-to-do and middle class 
Russian consumers responded with non-stop purchasing.  Now, U.S. 
consumer goods companies can turn to supplying the 150 million plus 
Russian consumers outside Russia's two leading cities, Moscow and St. 
Petersburg, who are still unable to purchase most Western consumer 
goods.  Best prospects include cosmetics, perfumes, cleaning products, 
videotapes, books, pet supplies, and others. 
 
Data Table 
                               1994        1995        1996 
 
A. Total Market Size           2000        3000        4000 
B. Total Local Production      1200        1000         800 
C. Total Exports                 50          50          50 
D. Total Imports                850        2050        3250 
E. Total Imports from U.S.       30          34         100 
 
The above statistics, except for 1994 imports from the U.S., are 
unofficial estimates. 
 
 
2.  Building Products (BLD) 
 
Though the quality of Russian produced building products is 
substantially lower than Western products, their price is just as high.  
As a result, Russian firms generally prefer to buy Western products.  
Building products are sold through wholesale and retail shops.  European 
suppliers are developing an increasing share of this market.  Demand is 
especially high in major industrial cities, where many offices, shops, 
and hotels are being refurbished and built.  The most promising 
subsectors are building materials and products for interior finishing. 
 
Data Table 
                                  1994        1995        1996 
 
A. Total Market Size               620         600         650 
B. Total Local Production          445         400         400 
C. Total Exports                    81          80         100 
D. Total Imports                   256         280         350 
E. Total Imports from U.S.          27          24         104 
 
The above statistics, except for 1994 imports from the U.S., are 
unofficial estimates. 
 
 
3.   Computers and Peripherals (CPT) 
 
The computer market is one of the most dynamic in Russia.  While other 
industries are slowing down, computer production and trade continue to 
gain momentum.  Buyers are moving from mediocre computers produced in 
Hong Kong, Taiwan, Singapore, and Russia to high quality computers and 
peripherals from the U.S., Europe, and Japan.  The March 1994 lifting of 
COCOM restrictions on importing technology into Russia has greatly 
expanded U.S. export potential in this  market.  While the demand for 
286-based machines is lower, 386 and even 486 machines are winning the 
market.  Hundreds of computer trading companies have been established 
recently, and most want to distribute U.S. products.  The most promising 
subsectors are 386 machines, local area network equipment, laser 
printers, and scanners. 
 
Data Table 
                               1994        1995        1996 
 
A. Total Market Size           1158        1140        1160 
B. Total Local Production       821         800         800 
C. Total Exports                  3          10          10 
D. Total Imports                340         350         370 
E. Total Imports from U.S.      114         130         205 
 
The above statistics, except for 1994 imports from the U.S., are 
unofficial estimates. 
 
 
4.  Telecommunications Equipment (TEL) 
 
The present Russian telecommunications system has little capacity, low 
penetration and call completion rates, and lack of modern communications 
services.  It has weak and erratic local, inter-city, and international 
connections.  Telecommunications is one of the most rapidly developing 
sectors in Russia.  Currently, Russia is developing several 
telecommunications projects: international fiber optic and microwave 
networks, nation-wide long distance networks, and mobile (cellular or 
paging) networks.  Most promising subsectors include: fiber optic cable, 
switching equipment, telecommunications software, cellular phones.  
 
Data Table 
                                 1994        1995        1996 
A. Total Market Size              901         940        1040 
B. Total Local Production         301         300         300 
C. Total Exports                    9          10          10 
D. Total Imports                  609         650         750 
E. Total Imports from U.S.         55          88         158 
 
The above statistics, except for 1994 imports from the U.S., are 
unofficial estimates. 
 
 
5.  Aircraft and Parts (AIR) 
 
Russia's airline fleet is faced with massive obsolescence.  More than 
1,000 aircraft (four-fifths for domestic, the rest for international) 
must be replaced by the end of the decade, and many older planes require 
replacement parts and extensive maintenance.  Russian aviation companies 
seek U.S.-made jet engines and avionics to produce low-cost aircraft for 
domestic markets.  Dozens of independent regional and private airlines 
seek to lease new or used U.S. aircraft in order to fly both 
international and domestic routes.  Russia's new rich, and its new 
private companies, are beginning to U.S. light aircraft for recreation 
and business transport.   Most promising subsectors are large passenger 
aircraft, light aircraft, and jet engines.  
 
Data Table 
                                   1994        1995        1996 
 
A. Total Market Size                960         805         660 
B. Total Local Production           715         650         600 
C. Total Exports                    100         100         100 
D. Total Imports                    345          85         160 
E. Total Imports from U.S.          343          80         150 
 
The above statistics, except for 1994 imports from the U.S., are 
unofficial estimates. 
 
 
6.  Food Processing and Packaging (FPP) 
 
Consumer demand for high quality, attractively packaged foodstuffs will 
make this sector one of the top prospects for the next several years.  
Major U.S. food companies (Pepsico, Coca-Cola, Baskin-Robbins, and 
others) are investing heavily in Russia, and will require U.S. equipment 
to establish new production sites.  Also, the Russian government's 
International Agroindustrial Fund and an OPIC food processing investment 
fund will help Russian food processors to modernize with Western 
equipment.  Most promising subsectors are baby food making machinery, 
ready-to-eat food production lines, soft drink and beer production 
machinery, and dairy products packaging equipment. 
 
Data Table 
                                   1994        1995        1996 
 
A. Total Market                     490         690         890 
B. Total Local Production           422         400         400 
C. Total Exports                      5          10          10 
D. Total Imports                    288         300         500 
E. Total Imports from U.S.           11          10          80 
 
The above statistics, except for 1994 imports from the U.S., are 
unofficial estimates. 
 
 
7.  Forestry and Woodworking Machinery (FOR) 
 
Timber is one of Russia's top potential exports, and the Russian 
woodworking industry needs Western-made equipment to improve production 
efficiency.  This year, the Russian government plans to sell shares in 
50 top timber holding companies to raise money for modernization.  An 
expected U.S. Export-Import Bank framework agreement on forestry and 
wood processing will provide financial support for this modernization 
effort.  Last December, the Russian government established a U.S. 
subsidiary, the Russian Timber Investment Corporation, to encourage U.S. 
companies to invest in the Russian timber industry.  Best prospects 
include machinery to make both narrow and wide boards, conveyer belts, 
and papermaking machinery.    
 
Data Table 
                                    1994        1995        1996 
 
A. Total Market Size                 500         600         800 
B. Total Local Production            400         350         300 
C. Total Exports                      20          20          20 
D. Total Imports                     120         270         520 
E. Total Imports from U.S.             8           4          64 
 
The above statistics, except for 1994 imports from the U.S., are 
unofficial estimates. 
 
8.  Information Services (INF) 
 
Russian government agencies, financing organizations and banks, Western 
companies with offices in Russia, and increasing numbers of private 
Russian firms seek integrated information systems for their operations.  
The Russian government holds numerous tenders to supply hardware, 
software, and services to government agencies.  Increasingly regional 
authorities are also now installing information systems.  Most often, 
these organizations seek a reliable Western or Russian information 
services firm/systems integrator to design and install an integrated 
information system.  The 1994 removal of COCOM restrictions on the 
import of advanced computers into Russia has accelerated the growth of 
this market.  Most major U.S. computer companies are now active in the 
Russian market.  USAID, World Bank, and U.S. Export-Import Bank 
financing supports many of these purchases.  Best subsectors include 
general management information consulting and systems integration.   
 
Data Table 
                                  1994        1995        1996 
 
A. Total Market Size               500         600         700 
B. Total Local Production          200         400         500 
C. Total Exports                    10          30          60 
D. Total Imports                   310         230         260 
E. Total Imports from U.S.          30          40          90 
 
The above statistics, except for 1994 imports from the U.S., are 
unofficial estimates. 
 
 
9.  Business Equipment (BUS) 
 
As new Russian firms and government agencies modernize their offices, 
U.S. producers can expect continued demand for Western business 
equipment. U.S. producers will face strong challenges from Japanese, 
Taiwanese, and Korean producers, and weak competition from domestic 
suppliers.  Aggressive U.S. marketing, especially in major cities 
outside Moscow, will lead to strong growth in sale.  Best subsectors 
include facsimile, copying, and answering machines. 
 
Data Table 
                                    1994        1995        1996 
 
A. Total Market Size                 540         599         649 
B. Total Local Production            300         300         300 
C. Total Exports                       1           1           1 
D. Total Imports                     241         300         350 
E. Total Imports from U.S.            21          16          66 
 
The above statistics, except for 1994 imports from the U.S., are 
unofficial estimates. 
 
 
10.  Architectural/Construction/Engineering Services (ACE) 
 
Russia is a good market for U.S. construction and engineering services.  
In Russia's major cities, old buildings are being renovated, and new 
ones built.  Outside Russia's major cities, the newly rich and even the 
not-so-rich are building or renovating dachas.  Many of Russia's large 
factories are seeking foreign engineering firms to help them modernize.  
For example, Hunter Engineering is close to a $185 million deal to 
renovate one of Russia's largest aluminum plants.  U.S. firms will need 
to be aggressive to gain market share, since Turkish and other European 
construction firms are also active in the market.  The most promising 
subsectors are civil design/architectural services, non-industrial 
development services, and hotel/commercial construction and renovation. 
 
Data Table 
                                      1994        1995        1996 
 
A. Total Market Size                   700        1100        1100 
B. Total Local Production              410         710         710 
C. Total Exports                        10          10          10 
D. Total Imports                       300         400         400 
E. Total Imports from U.S.              50         200         250 
 
The above statistics, except for 1994 imports from the U.S., are 
unofficial estimates. 
 
 
11.  Apparel (APP) 
 
Russian clothing production has plummeted in the last three years.  By 
the end of 1994, net output of apparel and knitwear was 40% of what it 
was in 1991.  Russian-made apparel retains its generally poor quality 
and unattractive design, while producers increasing prices sharply.  
While production of expensive goods remained at the same level, the 
output of cheap knitwear, clothes, and underwear declined markedly.  Up 
to 80% of the population prefer foreign-made apparel.  While inexpensive 
Chinese, Turkish, and Korean products have much market share, better 
quality European and American women's clothing is in demand.  Most 
promising subsectors are pants and jeans, jackets and suits, shirts, 
coats, and skirts and dresses. 
 
Data Table 
                                       1994        1995        1996 
 
A. Total Market Size                    780         850         950 
B. Total Local Production               840         640         640 
C. Total Exports                        151         150         150 
D. Total Imports                         91         360         460 
E. Total Imports from U.S.               27          12          52 
 
The above statistics, except for 1994 imports from the U.S., are 
unofficial estimates. 
 
 
12.  Oil and Gas Field Machinery (OGM) 
 
Oil and gas field machinery and services remains a promising sector in 
Russia.  The U.S. Export-Import Bank Oil and Gas Framework Agreement, 
World Bank, and European Bank for Reconstruction and Development (EBRD) 
loans have greatly improved the market potential.  U.S. firms are active 
in several large projects to develop oil and gas reserves in Timan 
Pechora, Western Siberia, and Sakhalin Island.  Gazprom plans 
significant pipeline construction and renovation.  These projects, 
involving billions of dollars invested by Texaco, Exxon, Amoco, Conoco, 
Marathon, and others, will require large procurements for oil and gas 
field machinery and services.  Promising subsectors include 
hydrofracturing equipment, pumps, and design and construction management 
services. 
 
Data Table 
                                   1994        1995        1996 
 
A. Total Market Size                646         650         660 
B. Total Local Production           452         450         450 
C. Total Exports                     17          20          20 
D. Total Imports                    211         220         230 
E. Total Imports from U.S.          131          98         128 
 
The above statistics, except for 1994 imports from the U.S., are 
unofficial estimates. 
 
 
13.  Medical Equipment (MED) 
 
Like other sectors in the economy, the medical equipment sector is 
changing.  The Russian government is moving from purchasing foreign 
medical equipment to buying it from Russian manufacturers.  Government 
purchases of foreign equipment were usually linked to foreign loans, 
foreign credit lines, and international development projects.  The 
Russian government is now more willing to buy industrial equipment to 
manufacture medical equipment and pharmaceuticals.  At the same time, 
regional health officials and private hospitals are becoming medical 
equipment buyers.  Also, large industrial enterprises and associations 
have become active buyers of medical equipment for their own hospitals, 
clinics and medical units.  The most promising subsectors are radiology 
equipment, diagnostic equipment, dental equipment, and laboratory 
equipment. 
 
Data Table 
                                      1994        1995        1996 
 
A. Total Market Size                   920         960        1010 
B. Total Local Production               75          70          70 
C. Total Exports                         7          10          10 
D. Total Imports                       852         900         950 
E. Total Imports from U.S.              61          64          89 
 
The above statistics, except for 1994 imports from the U.S., are 
unofficial estimates. 
 
 
14.  Electric Power Systems (ELP) 
 
The Russian electric power sector is in disarray.  Output of electricity 
has been falling since 1991.  In 1994, output was 8 percent lower than 
in 1993.  As a result, more and more demand for power is unsatisfied.  
The industry requires equipment, technical assistance, and investment to 
modernize its production facilities.  More than one third of Russian 
power plant capacity is badly outdated.  Many foreign firms -- including 
General Electric, Babcock and Wilcox, and others -- are involved in 
joint ventures and projects with Russian power equipment and power 
transmission companies.  Best subsectors are gas turbines, steam 
turbines, and boilers.  
 
Data Table 
                                      1994        1995        1996 
 
A. Total Market Size                   117         130         140 
B. Total Local Production              100         100         100 
C. Total Exports                        74          70          70 
D. Total Imports                        91         100         110 
E. Total Imports from U.S.              10          13          28 
 
 
The above statistics, except for 1994 imports from the U.S., are 
unofficial estimates. 
 
 
15.  Pollution Control Equipment (POL) 
 
Most older Russian industrial enterprises lack adequate pollution 
control equipment.  Lack of money still prevents Russian enterprises 
from purchasing necessary pollution control equipment on a major scale.  
A good approach to the market is for U.S. producers to participate in 
major Russian industrial modernization projects with secured financing.  
Russian end-users have little experience or familiarity with state-of-
the-art Western pollution control equipment, yet should be receptive to 
U.S.-made equipment.  Most promising subsectors are gas, water and air 
emission control equipment and filters, emission control equipment, and 
water sanitation and treatment equipment. 
 
Data Table 
                                        1994        1995        1996 
 
A. Total Market Size                      75          85         995 
B. Total Local Production                 75          75          75 
C. Total Exports                          50          50          50 
D. Total Imports                          50          60          70 
E. Total Imports from U.S.                 8          10          15 
 
The above statistics, except for 1994 imports from the U.S., are 
unofficial estimates. 
 
 
Note:  Data on 1994 exports and imports come from the Russian 
government, and should be considered relatively reliable.  Definitions 
of products and data gathering techniques may differ slightly.  In 
general, because of data collection problems, Russian estimates of 
imports and exports will underestimate actual figures.  Data on imports 
from the United States come from the U.S. Department of Commerce, and 
are considered to be reliable.  We have also checked this data against 
Russian data, and find basic confirmation.  We were unable to secure 
reliable data about total market size or total local production.   
 
Best Agricultural Prospects 
 
Note:  Data for agriculture "best prospects", especially PS&D data, are 
scarce.  For some of the best products, value data have been used.  U.S. 
agricultural export data for CY1994 come from USDOC's Bureau of Census.  
Russian data sources (i.e., the Russian State Statistical Committee and 
the Russian Customs Committee) are unreliable, and underestimate actual 
trade flows. 
 
 
RED MEATS, FRESH/CHILLED/FROZEN 
(Data in 1,000 metric tons except for imports from U.S.) 
                            
 
                                       1994     1995      1996 
 
Total Market Size -                    5980     5880      5700 
Total Production -                     5510     5370      5250 
Total Exports -                           0        0         0 
Total Imports -                         470      510       450 
Imports from the U.S. -                  30.9     32        28 
(USD$1 million) 
 
The above statistics, except for 1994 imports from U.S., are unofficial 
estimates. 
 
Red meat exports to the Russian Federation have been stimulated by the 
continuing decline in livestock inventories and stagnation in processed 
meat production.  U.S. meat products are especially competitive given 
their price and quality.  Niches exist for meat products which run the 
gamut from variety meats to prime, USDA portion-controlled cuts.  
Recently announced duty changes (the import duties on red meat are 
reportedly scheduled to increase from 8 to 15 percent on July 1, 1995), 
and the rescission of value-added tax (VAT) exemptions on imported foods 
(as of April 1995, the VAT amounts to 10 percent of landed value plus 
import duty) will make meat products more costly to Russians, and weaken 
demand.  Nonetheless, because of the decline in the domestic industry, 
Russians will need to continue to source meat from overseas, and  U.S. 
meats enjoy an excellent reputation.  Competition for the Russian market 
comes chiefly from the European Union. 
 
U.S. exporters should note that all raw pork shipped to Russia must go 
immediately into processing.  Additionally, all U.S. exporters should 
ensure that they secure all necessary documentation demanded by the 
Russian Government, especially the bilingual veterinary protocol. 
 
POULTRY 
(All data in 1,000 metric tons except imports from the U.S.) 
 
                                       1994      1995      1996 
 
Total Market Size                      1595      1590      1550 
Total Production                       1235      1215      1200 
Total Imports                           360       375       350 
Total Exports                             0         0         0 
Imports from the U.S.                   310       280       270 
(USD$1 million) 
 
The above statistics, except for 1994 imports from the U.S., are 
unofficial estimates. 
 
U.S. poultry exports boomed in 1994, turning the Russian Federation into 
the number one export market for U.S. poultry.  Russians expressed 
special preference for U.S. chicken leg quarters, which were 
competitively priced.  Market niches exist for other products such as 
chicken breasts, turkey, and processed poultry products.  The Russian 
poultry industry continues to decline, and thus far, poultry has been a 
relatively cheap source of protein.  Recently announced duty increases 
(from 20 to 25 percent, reportedly to take effect on July 1) and the 
rescission of VAT exemptions (10 percent of landed value and import duty 
as of April 1995) will reduce consumption.  Competition is principally 
from the European Union.  
 
APPLES 
(Data are in 1,000 metric tons) 
 
                                        1994       1995      1996 
 
 
Total Market Size -                     1864       1580      1530 
Total Production -                      1544       1230      1200 
Total Exports -                            0          0         0 
Total Imports -                          320        350       330 
Imports from the U.S 
(Data unavailable) 
 
The above statistics, except for 1994 imports from the U.S., are 
unofficial estimates. 
 
Given the inadequacies of the distribution system in Russian and the 
generally poor quality of Russian apples, Russia will continue to be 
obliged to import a significant quantity of apples.  Opportunities for 
U.S. exporters exist in major cities of European Russia (e.g., Moscow, 
St. Petersburg, Nizhniy Novgorod), Eastern Siberia, and the Russian Far 
East (RFE).  Washington State apples are already making some headway in 
the RFE, although New Zealand is also vying for this market.  New duties 
for apples have not been announced yet.  The old duty structure is .2 
ECU per kilo except for the period of January 1-July 31, when apples can 
be imported into Russia duty-free.  A VAT of 10 percent on customs value 
and import duties is currently in effect. 
 
TREE NUTS 
                                      1994         1995       1996 
 
Total Market Size  (no data) 
Total Production  (no data) 
Total Exports (no data) 
Total Imports (no data) 
Imports from the U.S.                 4.39          4.6       4.9 
(USD$1 million) 
 
The above statistics, except for 1994 imports from the U.S., are 
unofficial estimates. 
 
U.S. tree nut exports to the Russian Federation have been growing 
rapidly since 1993.  The new import duty for tree nuts has not been 
announced (the current duty is 20 percent).  A VAT of 10 percent of 
customs value and import duties is currently in effect.  Markets exist 
for tree nuts as inputs (for confectionery and baked goods) and for 
direct consumption.  Competition comes mainly from the European Union. 
 
VI.  TRADE REGULATIONS AND STANDARDS 
 
Trade Barriers 
 
Introduction of new import tariff schedules is, apparently, becoming an 
annual event in Russia.  Along with this trend is the fact that import 
tariffs are being raised.  In July 1995, Russia introduced a new import 
tariff schedule.  The mean 1995 import tariff went up from 11.4% to 
12.5%.  Although a number of products received lower tariffs, higher 
tariffs were imposed on imported goods in most demand, especially food 
products.  With these changes, the Russian government has raised the 
minimum duty to 5%, except for a reduced number of duty-free goods, and 
lowered the maximum duty to 30%, except for a few luxury goods. 
 
Besides import tariffs, there are two other types of duties applied to 
imported goods:  excise tax and value-added-tax (VAT).  Excise tax 
applies to a number of luxury goods, such as alcohol, cigarettes, cars, 
etc.  It varies from 10% to 250%.  The VAT rate of 23 percent (which is 
in reality a 20 percent VAT plus a three percent "special tax" ) is 
applied to the import price plus tariff plus excise tax.   
 
Customs Valuation 
 
Customs duties are payable on the customs value of goods in hard 
currency or rubles at the current exchange rate.  The customs value is 
generally considered to be the CIF price of the goods imported.  A 
customs processing fee of 0.15% of the actual cost of the goods is also 
levied.  The fee for temporary imports is rubles 1,000.  According to 
customs regulations, customs processing should take not longer than one 
month.  If acceptance of goods is refused by Russian Customs, 
regulations call for the goods to be returned to the country of origin. 
 
Import Licenses 
 
Import licenses are required for importation of various goods including 
combat and sporting weapons, self-defense articles, explosives, military 
and ciphering equipment, radioactive materials and waste including 
uranium, strong poisons and narcotics, and precious metals, alloys and 
stones.  Most import licenses are issued by the Russian Ministry of 
Foreign Economic Relations or its regional branches, and controlled by 
the State Customs Committee.  Import licenses for sporting weapons and 
self-defense articles are issued by the Ministry of Internal Affairs.    
 
Export Controls 
 
Before 1995, exports of "strategically important raw materials" such as 
oil and gas, non-ferrous metals, fertilizers, cellulose, grain, fish 
products, rough diamonds and electric power required special export 
licenses issued by the Russian Ministry of Foreign Economic Relations 
(MINFER) to a limited number of exporters.  A presidential decree, 
number 245 (article 2) of March 6, 1995 lifted this restriction, 
allowing the export of "strategically important raw materials"  from 
Russia without special permission of MINFER.  The decree also abolished 
the list of "special exporters."  However, export of weapons, military 
equipment and dual-use materials and technology continues to require an 
export license.  Exports of "strategically important raw materials" 
still require registration with MINFER. 
 
Import/Export Documentation 
 
Importers are required to complete a customs freight declaration for 
every item imported.  The declaration form consists of 54 paragraphs and 
should be completed in the Russian language for presentation to customs 
authorities.  Certificates of origin and conformity (see "Standards" 
below) should also be presented at customs.  Similarly, exporters are 
required to complete an export declaration and, if necessary, present 
the appropriate export license at customs. 
 
Temporary Entry 
 
Temporary imports by foreign companies which are accredited with Russian 
government authorities are exempt from customs duties.  This applies to 
goods imported only for company use and for one year only.  Companies 
not accredited with Russian government authorities are charged 3 percent 
of the total cost of the product on a monthly basis.  In this case, 
total cost equals original product price plus all import taxes. 
 
Labeling, Marking Requirements 
 
No special labeling or marking requirements are in effect. 
 
Prohibited Imports 
 
The customs code lists no products which are prohibited from import 
under any circumstance. 
 
Standards 
 
Many products imported for sale into the Russian Federation are required 
to have a certificate of conformity issued by the Russian State 
Committee on Standards (Gosstandart).  Gosstandart tests and certifies 
products according to Russian Government standards, rather than other 
widely-accepted international standards (i.e. the ISO-9000 system).  
Gosstandart and its authorized agents are the sole sources for 
certification in Russia.   
 
Testing protocols from the IECEE (electrical equipment) and the IECQ 
(electrical components), both of which fall under the International 
Electrotechnical Commission, from Underwriters Laboratories, and other 
bodies are accepted by Gosstandart and help to expedite certification by 
the Russian agency.  The certificate of conformity is valid for 3 years 
and must accompany every shipment.  Copies of the certificate are 
acceptable if original seals of the U.S. company holding the original 
certificate accompany the copy.  Russian retailers are obliged to have 
on hand certificates for all imported products sold in their stores; 
violation of this requirement can bring penalties of up to the 
equivalent $10,000. 
 
Free Trade Zones/Warehouses 
 
There are no actual free trade zones in Russia.  There are some free 
economic zones designed to encourage investments in specific areas, as 
well as free customs zones and free warehouses.  Customs duties do not 
apply in free customs zones and free warehouses.  Some production and 
commercial transactions can take place within these zones, but not 
retail sales.  The storage period is not limited.  Free customs zones 
and free warehouses are located in customs areas (airports, seaports, 
railway, and truck terminals).  
 
Special Import Provisions 
 
No special import provisions apply. 
 
Membership in Free Trade Arrangements 
 
Russia does not participate in any free trade arrangements.  Russia has 
an association agreement with the European Union, proposes to join the 
GATT/WTO, and benefits currently from GSP and MFN status in the United 
States. 
 
VII.  INVESTMENT CLIMATE 
 
Openness to Foreign Investment 
 
While the policy of the Russian government is to encourage foreign 
investment, it has had difficulties in creating a stable and attractive 
investment climate.  Economic and political uncertainty serve as 
disincentives to companies looking for investment opportunities.   
Although there are no significant legal barriers to doing business in 
Russia, the absence of sufficiently developed civil, commercial and 
criminal codes is a major constraint.  In addition, a confusing tax 
system, and a rise in violent "mafia" instigated crime have become a 
problem for foreign (and Russian) business.  Bureaucratic requirements 
can be confusing and burdensome to investors and bureaucratic discretion 
may be capricious in awarding tenders or development rights to 
companies.  Ownership of real property is still being legislated, and 
violations of intellectual property are serious and on the rise.  A 
deteriorated infrastructure adds to the difficulties of doing business -
- telephones, roads and transport are all of poor quality.  Corruption 
in commercial transactions has become a major issue in the last several 
years. 
 
Despite the problems detailed in this report, most U.S. companies in 
Russia believe that opportunities justify the risks, uncertainties and 
considerable bureaucratic obstacles.  Few established foreign companies 
are leaving and many continue to demonstrate an interest in Russia's 
rich geological and human resources, world-class high-technology and 
vast potential market. 
 
Russia enacted an investment law in 1991 which defines the permissible 
forms of foreign investments as well as the rights and obligations of 
the government and investors.  Also in force are laws on enterprises, on 
joint stock companies and on the privatization of national assets, as 
well as various presidential decrees.  In 1994 the government was 
preparing for review by the legislature draft laws on concessions, free 
enterprise zones, production sharing (for oil exploitation) and a 
revision of the 1991 investment code. 
 
The 1991 Investment Code defines foreign investors as foreign legal 
entities, citizens, states or international bodies.  Foreign investments 
may be made in all kinds of property (including intellectual), or placed 
in entrepreneurial projects and other activities to derive profit.  
Investments may be in the form of wholly-owned companies, joint 
ventures, portfolio investment or in (limited) rights to use land or 
other natural resources. 
 
Russian foreign investment regulations regarding permissible activities, 
prior authorization and notification requirements are confusing and 
contradictory.  The Ministry of Finance, local authorities and/or 
various central government bodies all register foreign investments.  
Prior approval is required for investment in new enterprises using 
assets of existing Russian enterprises, foreign investment in defense 
industries (which may be prohibited in some cases), investment in the 
exploitation of natural resources, all investments over 50 million 
rubles, investment ventures in which the foreign share exceeds 50 
percent, or investment to take over incomplete housing and construction 
projects.  Additional registration requirements exist for investments 
exceeding 100 million rubles.  Projects of foreign enterprises may also 
be subject to expert examination for ecological considerations or where 
a large-scale construction or modernization is envisaged. 
 
The 1991 Investment Code guarantees foreign investors rights not less 
favorable than those of Russian investors. 
 
The Russian post voucher (cash) privatization program adopted by 
presidential decree in July of 1994 explicitly grants foreign investors 
the right to participate in auctions and tenders and to purchase shares 
in privatized firms, although the Ministry of Finance must be informed 
of such action.  Some restrictions do apply.  For example, the federal 
government can limit foreign access to enterprises in strategic sectors 
such as defense, the energy sector, mining and minerals, transportation 
and communications.  However, the federal government plans to exempt 
entirely a list of firms engaged in the sale or production of "strategic 
commodities and products" from further privatization at least for the 
remainder of 1995.  Federal State Property Committee (GKI) Chairman 
Belyayev has repeatedly stated that foreign investors will play a key 
role in cash privatization and that they will be given national 
treatment.  Belyayev recently said that foreigners purchased 10 percent 
of all shares offered during the first (voucher) phase of privatization 
in Russia and that a higher level of foreign participation is desirable 
in the cash phase.  GKI reports that although Russian law does not yet 
allow foreigners to own land, foreign investors can take majority 
ownership in enterprises which own land.  The first such example has 
recently taken place in St. Petersburg.  As to municipal and oblast 
level enterprises, the local state property committees and 
administrations have substantial autonomy and  foreign investors will 
need to work closely with such authorities. 
 
Traditionally, all research and development in Russia was financed by 
the government and occurred in government-owned or controlled institutes 
and organizations.  The entire system is now in a state of transition.  
The government is providing considerably less funding for research that 
in the past and individual institutions are actively soliciting 
international participation in research projects (although some of the 
projects in which American firms have begun active cooperation still 
receive significant Russian government funding).  The legal basis for 
such cooperation is not yet firmly established, however, and the rights 
and obligations of all private parties (foreign or Russian) 
participating in government sponsored or subsidized research and 
development are spelled out in the specific contract and agreements 
reached by the parties involved. 
 
Russian law offers few incentives to foreign investors.  Those set out 
in the 1991 investment law, including certain tax benefits, have never 
been implemented, or have been largely eliminated or superseded by 
subsequent laws and decrees.   
 
Russia is well along in reforming its foreign trade regime in line with 
market standards.  Very few non-tariff elements remain.  The country has 
applied for accession to the World Trade Organization (WTO), has 
submitted a memorandum of foreign trade regime, and is preparing for the 
first meeting of its working group scheduled in 1995. 
 
Russia has raised import tariffs in several stages beginning from zero 
when the Soviet Union collapsed.  In July 1994 import duties were raised 
across the board, increasing the average weighted tariff to 11 percent 
from 7-8 percent, with some duties reaching 50 percent.  In March 1995, 
by presidential decree, these rates were revised to raise the floor 
(except for a reduced list of zero-duty goods) to five percent and lower 
the ceiling (except for a few luxury goods) to 30 percent; this raised 
the average weighted tariff further to 15-16 percent.  A 1995 
presidential decree provided for reducing or waiving import duties for 
investment projects of USD 100 million or more of which at least USD 10 
million is direct foreign investment. 
 
Inherited Soviet-era qualitative restrictions on imports were initially 
limited to security and health requirements, but Russia's July 1993 
customer protection law stipulated official certification (by 
GOSSTANDART) of imported products for conformity to Russian technical, 
safety, health and quality standards.  Requirements are still evolving, 
and are based on a combination of international (mostly European Union) 
and Russian standards.  U.S. companies have complained of costly 
procedures and arbitrary certification requirements.  A joint Russian-
U.S. communique of December 1993 pledges cooperation on improving and 
simplifying certification, testing and quality assurance.  Russia is 
establishing reciprocal standardization with the U.S. and with other 
countries and is reciprocally accepting foreign certification by 
accredited institutions.  Import licenses are required on the normal 
range of dangerous and harmful materials and goods. 
 
The U.S. Government has imposed antidumping duties on Russian 
ferrosilicon (June 1993), titanium sponge (August 1992), and urea (June 
1992).  Investigations are underway concerning alleged dumping of 
Russian pure magnesium, ferrovanadium and nitrided vanadium.  
Antidumping duties imposed on Russian uranium in 1992 were suspended in 
1993 in exchange for a matched sales agreement. 
 
Banking operations in Russia by foreigners, though improved,  remain 
problematic.  A November 1993 presidential decree imposed a two-year 
moratorium on foreign bank operations with Russian residents.   This 
decree conflicted with a September 1993 decree sheltering foreign 
investors from adverse legal changes for three years and violated the 
principle of nonretroactivity of law since it applied to foreign banks 
licensed in October 1993.  A June 1994 decree eased the November 1993 
restrictions for existing European banks and an April 1995 decree lifted 
the restrictions on the two existing American banks.  A pending Duma 
bill "On Banks and Banking Activity" contains a statute that extends 
until January 1, 1996, a moratorium on foreign banks' dealing with 
Russian residents, and introduces the policy of reciprocity for any 
foreign bank seeking to obtain an operating license.     
 
The banking bill also allows Russian authorities to set limits on the 
total amount of foreign banking capital as a percentage of overall 
banking capital.  Currently, that limit stands at 12 percent, and the 
capital of all operating foreign banks is considerably below this 
figure.  The Russian insurance industry is also lobbying for protection.  
Increasingly, foreign insurance companies may follow the example of a 
major American insurance firm, which entered the market via a 50/50 
joint venture with a large Russian bank.  Measures to limit foreign 
attorneys not licensed in Russia from providing legal counsel on Russian 
laws have had little effect on the foreign law firms, which continue to 
rely largely on foreign lawyers. 
 
Major changes have occurred in the oil and gas sector during the past 12 
months.  In October 1994, seven foreign joint ventures obtained oil 
export tax exemptions for three years for the purpose of capital 
recoupment.  An additional seven joint ventures received exemptions in 
February 1995 on similar terms, while another group of companies hopes 
to have its request approved by the end of June 1995.  The benefit to 
the companies, however, may prove ephemeral, as the government has 
announced that it will eliminate the export tax altogether by the end of 
1995, replacing it with an excise tax on production to which exemptions 
may not apply.  In the meantime, the export tax has been reduced from 30 
to 23 ecus, with another decrease to 20 ecus expected in June 1995. 
 
In February 1995 President Yeltsin signed into law a bill amending the 
1992 sub-surface resources law.  The amendments make it easier to obtain 
and transfer oil and gas production and exploration licenses, and 
substitute more modest royalties for the 10 percent mineral replacement 
tax.  In June 1995, the Duma passed legislation which would allow 
foreign oil companies to enter into production sharing contracts rather 
than rely exclusively on existing joint venture provisions in the 
foreign investment law; this legislation awaited the approval of the 
Federation Council and the President at the time this report was 
written. 
 
Another important development was the elimination of oil export quotas 
in January 1995.  Producers are now allowed to export their oil without 
prior approval from the Ministry of Foreign Relations.  Nevertheless, 
their ability to do so remains subject to their allocation of access 
rights to the oil pipeline system by the Ministry of Fuel and Energy and 
the state-owned pipeline company Transneft.  Under current rules, this 
means that roughly one-third of a company's production is given access 
to pipelines serving hard currency export markets.  Those established 
joint ventures which qualified for oil export tax exemptions have been 
given priority access to the pipeline system for the entirety of their 
production. 
 
Conversion and Transfer Policies 
 
Russia has a unified exchange rate which floats, based on a daily Moscow 
Interbank Currency Exchange auction where the Central Bank intervenes to 
smooth fluctuations.  In practice the Central Bank exerts considerable 
influence on the rate as it collects and resells most of Russia's export 
earnings. 
 
The ruble is fully convertible within Russia and CIS countries which 
remain in the ruble zone.  There are currently no restrictions on profit 
repatriation.  In January 1994 commercial banks became responsible for 
monitoring the repatriation of export earnings. 
 
Foreign and domestic companies may acquire, hold and sell foreign 
exchange freely, though hard currency cash transactions for goods and 
services within Russia are prohibited.  Russian enterprises are required 
to convert 50 percent of foreign currency earnings into rubles by 
selling such currency on either the currency market or to the Central 
Bank of Russia. 
 
Without special permission it is illegal for Russian companies or 
citizens to maintain a bank account outside of Russia for purposes other 
than operating expenses.  Licenses are required for offshore accounts 
and can be difficult to obtain.  Non-residents can open individual and 
commercial ruble accounts for servicing import/export operations 
(referred to as "T-accounts") and for investment (referred to as "I-
accounts").  However, ruble balances in T-accounts many not be converted 
back to U.S. dollars.  
 
Expropriation and Compensation 
 
The 1991 Investment Code prohibits the nationalization of foreign 
investments except following legislative action and where deemed to be 
in the national interest.  Such nationalizations may be appealed to the 
courts of the Russian federation, and are to be paid with prompt, 
adequate and effective compensation. 
 
While the domestic political situation remains ambiguous, the current 
central leadership is unlikely to nationalize foreign investment or 
engage in expropriation.  However, local government interference in 
several cases appears tantamount to expropriation; arbitration or legal 
proceedings are pending in some of these cases. 
 
Dispute Settlement 
 
Russia has a body of conflicting, overlapping and rapidly changing laws, 
decrees and regulations which has resulted in an ad hoc and 
unpredictable approach to doing business.   Independent dispute 
resolution in Russia is difficult to obtain; the judicial system is 
poorly developed.  Regional and local courts are not accustomed to 
adjudicating either commercial or international matters, and they (as 
well as courts in Moscow) are often subject to political pressure. 
 
Most western attorneys still refer their western clients who have 
investment or trade disputes in Russia to international arbitration in 
Stockholm or to courts abroad.  However, a foreign arbitration award can 
only be enforced in Russia if there is a reciprocal treaty between 
Russia and the country where the order was made, or, if no such treaty 
exists, if a Russian court reviews the procedures which led to the 
granting of the award and agrees that it was properly made and can be 
enforced. 
 
It is therefore worth considering the alternatives available in Russia.  
One choice is the Arbitration Court of the Russian Federation, which is 
part of the court system.  It has special procedures for seizure of 
property before trial, so property cannot be disposed of before the 
court has heard the claim, as well as for the enforcement of financial 
awards through the banks.  Additionally, the International Commercial 
Arbitration Court at the Russian Chamber of Commerce and Industry will 
hear claims if both parties agree to refer disputes there.  Applications 
can be made by parties to foreign trade agreements and by companies with 
foreign investments. 
 
The weakness in the system is the lack of differentiation in outcomes.  
All awards and orders are enforced by the officials of the district 
court whose procedures have not been modernized to take account of 
changes in business.  There is hope that a draft law on enforcement will 
result in more effective litigation.    
 
Russia is a member of the International Center for the Settlement of 
Investment Disputes and accepts binding international arbitration. 
 
Performance Requirements 
 
Performance requirements are not imposed by Russian law, and are not 
widely included as part of private contracts.  However, they have 
appeared in the agreements of large multinational companies investing in 
natural resources. 
 
Investors are not required to disclose proprietary information to the 
Russian government as part of the regulatory process. 
 
Right to Private Ownership and Establishment 
 
Both foreign and domestic legal entities may establish, purchase and 
dispose of businesses in Russia.  Investment in those sectors, affecting 
the national security (insurance, banking, natural resources) may be 
limited. 
 
Protection of Property Rights 
 
The constitution and a presidential decree issued in 1993 give Russian 
citizens general rights to own, inherit, lease, mortgage, and sell real 
property;  however, legislative gaps and ambiguities impede the general 
exercise of these rights.  Russia does not yet have a land code to 
regulate land use and ownership.  Thus far, Russian law and practice 
appear to restrict or prohibit foreigners from owning real estate.  The 
presidential decree of 1993 gave joint ventures with foreign 
participants the right to own real property, and a privatization decree 
issued last summer permitted foreign owners of privatized companies to 
receive title to enterprise land; however, such rights have not been 
codified and legislation regulating land use currently being considered 
by the Duma would likely prohibit foreigners from owning land.  The 
rights of Russian citizens to own and sell residential, recreational, 
and garden plots is clearly established with over 40 million properties 
of this type under private ownership.  However, uncertainty about more 
general rights to land title and mineral rights will persist until the 
Duma adopts clear and comprehensive legislation to regulate land use and 
ownership. 
 
In 1992-93 Russia enacted laws strengthening the protection of patents, 
trademarks and appellations of origins, and copyright of semiconductors, 
computer programs, literary, artistic and scientific works, and 
audio/visual recordings. 
 
The Patent Law, which accords with the norms of the World Intellectual 
Property Organization, includes a grace period, procedures for deferred 
examination, protection for chemical and pharmaceutical products, and 
national treatment for foreign patent holders.  Inventions are protected 
for 20 years, industrial designs for 10 years, and utility models for 
five years.  One must wait four years before applying for a compulsory 
license.  The Law on Trademarks and Appellation of Origins introduces 
for the first time in Russia protection of appellation of origins and 
provides for automatic recognition of Soviet trademarks upon 
presentation of the Soviet certificate of registration.   
 
The Law on Copyright and Neighboring Rights, enacted in August 1993, 
protects all forms of artistic creation, including audio/visual 
recordings and computer programs as literary works for the lifetime of 
the author plus 50 years and is compatible with the Bern Convention.  
The September 1992 Law on Topography of Integrated Microcircuits, which 
also protects computer programs, protects semiconductor topographies for 
10 years from the date of registration. 
 
Russia has acceded to the Universal Copyright Convention, the Paris 
Convention, the Bern Convention, the Patent Cooperation Treaty, the 
Geneva Phonogram Convention, and the Madrid Agreement.  Under the U.S.-
Russian Bilateral Investment Treaty (not yet ratified by the Russian 
side) Russia has undertaken to protect investors' intellectual property 
rights.  The U.S.-Russia Bilateral Trade Agreement mandates protection 
of the normal range of literary, scientific and artistic works through 
legislation and enforcement.   
 
While the Russian government has successfully passed good laws on 
protection of intellectual property, enforcement of those laws has been 
a low priority.  Russian authorities are engaged in a comprehensive 
revision of the Russian criminal and civil codes, including sections 
pertaining to intellectual property rights which would provide 
strengthened penalties, the establishment of specialized courts, 
particularly a patent court, with trained and experienced judges and 
attorneys, and trained police and customs officers.  Until these 
measures become reality, however, there is widespread marketing of 
pirated U.S. (and other) video-cassettes, recordings, books, computer 
software, clothes and toys.  Losses to manufacturers, authors and others 
are estimated to be in the hundreds of millions of dollars. 
 
The Russian Intellectual Property Agency, established in 1992 with 
direct accountability to the Russian president, was given responsibility 
to develop and coordinate state intellectual property policy, promote 
copyright protection, and collect and distribute royalties.  It was 
replaced in October 1993 by the revived Russian Authors Organization 
(RAO), a semi-official agency combining supervisory functions with 
advocacy of authors' commercial interests.  Rospatent is the official 
body responsible for registration and protection of patents and 
trademarks. 
 
Regulatory System:  Laws and Procedures 
 
The legal system in Russia is in a state of flux, with various parts of 
government struggling to create new laws on a broad array of topics.  In 
this environment negotiations and contracts for commercial transactions 
are complex and protracted.  Russia has implemented only part of its new 
commercial code and investors must carefully research all aspects of 
Russian law to ensure that each contract conforms with Russian law and 
embodies the basic provisions of the new, and where still valid, old 
codes.  Contracts must likewise seek to protect the foreign partner 
against contingencies which often arise.  Keeping up with legislative 
changes and presidential decrees is a daunting task.  Uneven 
implementation of laws creates further complications; various officials, 
branches of government and jurisdictions interpret and apply regulations 
with little consistency and the decisions of one may be overruled or 
contested by another.  In addition, while a foreign investor may win a 
favorable decision from a Russian court, enforcement of judgments is 
problematic. 
 
Legal requirements may be less burdensome than reaching final agreement 
with local political and economic authorities; registration can be a 
lengthy, bureaucratic process, particularly where natural resources or 
defense production are involved.  Corruption is widespread and the fears 
of some Russian officials that foreigners will purchase Russian assets 
at below-market rates can impede bureaucratic approval. 
 
The Russian government is in the process of establishing a procurement 
regime.  So far that regime consists of a single law passed in December 
1994 and several implementing regulations currently in preparation.  
Russian officials have sought to make the law compatible with WTO 
standards and note that it does not prevent market access by foreign 
enterprises.  However, it also gives preference to domestic suppliers 
and allows the federal government to dictate supply in certain cases.  
Officials also say that Russia is considering signing the WTO 
procurement code as part of WTO accession. 
 
A major complaint of foreign business is the tax system, in particular 
the number of taxes, the stability of the system, transparency and due 
process.  Russia imposes numerous taxes including profits, excess wage, 
dividend, withholding, payroll, road use, property, VAT, import and 
export tariffs, excise and local taxes.  These taxes may total more than 
a company's profit - proving a very real disincentive to both Russian 
and foreign businesses.  In addition to high rates, taxes have been 
changed frequently and radically, often with no warning and sometimes 
with retroactive effect.  Businesses are unable to rely on a particular 
tax regime and may suddenly find themselves unable to make a profit.  
Finally, businesses complain about the lack of due process -tax 
penalties are high and do not distinguish between inadvertent and 
criminal errors and the appeals process is cumbersome.   The Duma is 
beginning to address these problems.  It passed a new profits bill, 
signed into law, which repeals the excess wage tax beginning January 1, 
1996.  In mid-1995 the Duma was deliberating changes to the basic tax 
law to address the due process, stability and transparency problems.  
Finally, the Finance Ministry in 1995 was drafting  a basic tax code 
which should be introduced into the Duma in the fall of 1995 and take 
effect in 1997.     
 
Efficient Capital Markets and Portfolio Investment 
 
Although undervalued Russian companies are attractive for outside and 
domestic investors, significant problems currently inhibit the full 
development of the market. Barriers to portfolio investment include an 
uncertain tax structure, licensing requirements for investment by non-
residents, and the uncertain shape of the political landscape in the 
next year.  In the spring of 1995, a little-known federal service for 
currency and export control revived an obscure 1992 measure requiring 
licenses for hard currency foreign portfolio investment.  Another major 
problem area is undeveloped market infrastructure, which complicates the 
settlement and clearing of trades.  Shareholder rights violations also 
negatively affect the investment climate and depress the market for 
shares of Russia's privatized enterprises.  Corporate governance in 
general is a major issue, as enterprise directors regularly disregard 
the rights and interests of outside investors.  A joint-stock companies 
bill was drafted in 1994 and the Duma approved it in the first reading 
in June 1995.   
 
Nevertheless, major portfolio investors are eyeing the Russian market 
with anticipation.  A Federal Commission on Securities and Capital 
Markets was created in November 1994 to oversee market regulation.  In 
May 1995, the Duma passed a long-awaited bill on the securities market; 
the bill may be signed into law by President Yeltsin by mid-summer 1995.  
Investors are also encouraged by the recent establishment of western-
style registrars and custody services, and the entry into the Russian 
market of major western market players. 
 
Political Violence 
 
The political climate in Moscow is currently stable but unpredictable 
over the medium to long term.  After the violent political confrontation 
of late 1993, politics have returned to the floor of the legislature and 
the offices of government.  Political demonstrations remain modest in 
size and generally peaceful.  Although the February 1994 amnesty of the 
leaders of the October 1993 violence in Moscow reintroduced into the 
political system a number of forceful individuals, for the most part 
they have sought to achieve their agendas through peaceful means.  The 
war in Chechnya, which began in December 1994, raised fears of terrorism 
by the Chechen diaspora, especially in Moscow.  By mid-1995 there had 
been one such incident, the taking of a thousand Russian hostages in the 
southern town of Budyonnovsk. 
 
Crime has become one of the most frequently cited concerns of foreign 
(and Russian) business, particularly those involved with large amounts 
of cash and goods.  While organized crime is not new to Russia, recent 
years have seen an increase in the range and frequency of criminal 
activity.  Unfortunately, legal and judicial reforms have not kept pace 
with criminal advances.  Much crime is tied to commercial activity, with 
one half of all entrepreneurs in a recent survey reporting that they 
must pay kickbacks and protection to stay in business.  Failure to make 
these payments can be fatal and may generally prove a disincentive to 
the creation of new businesses.  President Yeltsin and his government 
acknowledge that crime and corruption are major problems and have asked 
the Duma to speed adoption of needed legislation.  Meanwhile, Prime 
Minister Chernomyrdin announced that the government will spend two 
trillion rubles to fight crime in 1994-95, and adopt tougher measures 
against official corruption. 
 
BITs 
 
Russia inherited from the Soviet Union Bilateral Investment Treaties 
(BITs) with Austria, Belgium and Luxembourg, Great Britain, Germany, 
Italy, Spain, Canada, the People's Republic of China, Korea, the 
Netherlands, Finland, France, and Switzerland.  In 1995 Russia itself 
was in various stages of negotiation with Bulgaria, Greece, Denmark, 
Cuba, Poland, Romania, the Czech Republic, Slovakia and the United 
States.  The U.S.-Russia BIT has been ratified by the U.S. Senate but 
still awaits Russian Duma ratification to enter into force.  
 
OPIC and Other Investment Insurance Programs 
 
In an agreement ratified at the June 1992 Summit, the U.S. Overseas 
Private Investment Corporation (OPIC) was authorized to provide loans, 
loan guarantees and investment insurance against political risks to U.S. 
companies investing in Russia.  OPIC generally insures against three 
political risks:  expropriation, political violence and currency 
inconvertibility.  In 1994 OPIC did not provide inconvertibility 
insurance in Russia, although in mid-1995 it announced that it was 
beginning to offer such coverage on a limited basis.  In 1994, to meet 
the demands of larger projects in Russia (and worldwide), OPIC doubled 
the amount of insurance and quadrupled the amount of finance support - 
to USD 200 million in each case - it can commit to an individual 
project.  Through March 1995, OPIC had committed over USD 2.2 billion in 
finance and insurance to 41 projects in Russia.  Total investment into 
these projects should reach USD 3.4 billion.  In December 1994, OPIC 
also committed to provide up to USD 500 million to support defense 
conversion projects. 
 
Russia is a member of the Multilateral Investment Guarantee Agency 
(MIGA). 
 
Labor 
 
The Russian labor market continues to undergo a slow and painful 
transition.  The majority of Russia's workforce is suited to the needs 
of the Soviet-era command economy and ill-suited to needs of an emerging 
market economy.  Unemployment continues to grow steadily, reaching 7.7 
percent of the workforce in early 1995.  In addition, another five 
percent of the workforce are underemployed, forced to work short weeks, 
or on extended furloughs.  There is a large supply of skilled workers in 
most Russian industries, but the demand for their skills is falling 
rapidly.  Employment is growing rapidly in banking, insurance and other 
business services.   
 
Labor-management relations in Russia are strained.  Economic 
restructuring has caused rising anxiety and unrest among Russian 
workers, and trade unions are generally weak and ineffective.  Most of 
the "official" labor unions, formerly the Communist trade unions, 
operate in a subservient role to enterprise management, in much the same 
way they did in Soviet times.  Workers have little confidence in trade 
unions and most feel powerless to challenge management.  The independent 
unions are much more effective at the enterprise level, but because they 
represent a small percentage of total workers their national clout is 
very small. 
 
The Russian government generally adheres to ILO conventions protecting 
worker rights, but enforcement is inadequate.  Perhaps the most 
troubling worker issue in present day Russia is the abysmal state of 
worker safety.  Employers have generally reduced spending on safety 
equipment and government enforcement of safety regulations is very poor. 
 
Foreign Trade Zones/Free Ports 
 
Russia has legislation from both the Soviet era and since 1991 creating 
foreign economic zones.  Unfortunately, the laws and their 
implementation have led to a disorganized and poorly functioning regime, 
with only two zones officially created - in Kaliningrad and Nakhodka.  
The Russian government and the Duma have been working for some time on  
new legislation to regularize and regulate free economic zones; it is 
not clear when the new law will be passed. 
 
Capital Outflow Policy 
 
Without permission it is illegal for a Russian legal entity or citizen 
to maintain a bank account outside of Russia for more than operating 
expenses; licenses are required for offshore accounts and can be 
difficult to obtain.  Little legitimate outward investment is occurring; 
most capital outflow is the result of simple capital flight rather than 
a growth in criminal transactions. 
 
Capital flight is a significant problem, with an estimated USD 40-50 
billion having left the country in recent years; including some USD 17 
billion in 1994.  The only true method to curb capital flight will be to 
stabilize the Russian economy, reduce inflation and make it a more 
attractive environment in which to invest. 
 
VIII.  TRADE AND PROJECT FINANCING 
 
Brief Description of Banking System 
 
The Russian commercial banking system is only five years old, but it has 
advanced rapidly since its inception.  There are currently over 2500 
banks making up the banking system, with the majority concentrated 
disproportionately in Moscow, St. Petersburg and other large cities.  
About one-third of the banks in Russia derive from the old state banking 
system, while the rest were newly created, most as late as 1991.  The 
20-30 largest banks are approaching Western standards and offering more 
sophisticated banking services.  However, the vast majority of banks are 
small and only 10 percent has a capital base exceeding $1 million.  Many 
banks were founded in 1991-92 by enterprises as an expedient way to 
funnel directed government credits and still have the enterprise or 
person which founded them as the main depositor and borrower. 
 
More than 1000 Russian banks are authorized to deal with foreign 
currency accounts, and close to 300 of these banks have general licenses 
allowing them to conduct an entire range of banking transactions with 
foreign currency in both domestic and foreign markets.  Foreign exchange 
operations account for a large part of the business of these banks.  The 
official Central Bank payments, settlements and clearance system is 
still in the process of development, although transactions in Moscow can 
now clear in as short as several days.   
 
Cross-border, international financial transactions are now feasible as 
well.  More than 150 Russian banks are members of the Society for 
Worldwide Interbank Financial Telecommunication (SWIFT), and others have 
correspondent relationships with U.S. and other foreign banks that allow 
for electronic fund transfers between Russia and other countries. 
 
In October 1993, Citibank and Chase Manhattan Bank became the first U.S. 
banks to receive general licenses to open  subsidiaries in Russia.  
Other Western banks operating in Russia include Credit Lyonnais (St. 
Petersburg), BNP/Dresdner (St. Petersburg), and Bank of Austria 
(Moscow).  A November 1993 Presidential decree imposed a two-year 
moratorium on the operations of foreign banks in Russia, but further 
decrees issued in June 1994 and April 1995 have now confirmed that the 
originally-licensed foreign banks have full banking powers.  A 
commercial banking bill currently awaiting approval in the Duma will 
introduce a reciprocity requirement prohibiting a new foreign bank from 
receiving a license until a Russian bank is allowed to enter the country 
from which the foreign bank originates. 
 
Currency inconvertibility, which used to be a major concern for Western 
traders and investors, has largely been overcome by the opening of a 
number of currency exchanges and direct interbank trading throughout 
Russia.  The largest of these is the Moscow Interbank Currency Exchange 
(MICEX), which operates daily.  The introduction of a Moscow City 
turnover tax on MICEX operations has driven away at least one-third of 
MICEX business operations, primarily to the off-exchange currency 
market.  U.S. companies are reporting that currency convertibility can 
be easily arranged through commercial banks in Russia. 
 
Nonresidents, including foreign individuals and foreign companies that 
do not have a local subsidiary or joint venture, can open foreign 
currency accounts with authorized banks in Russia.  Funds in these 
accounts can be transferred abroad without restriction or exchanged for 
rubles on the Moscow Interbank Currency Exchange (MICEX) or through 
interbank mechanisms.  Foreign currency held in these accounts may be 
obtained from various sources, including resources transferred from 
abroad; payments from residents and non-residents for goods and services 
sold in Russia; repayment of liabilities to account holder; interest 
paid by authorized banks; return on investment on Russian territory; and 
income from other nonresident accounts with authorized banks.  In a new 
development, nonresidents can also now open ruble accounts for 
maintenance of domestic operations and servicing of export-import 
activities and for investment activities, including purchasing of 
privatization vouchers or shares of stock.  However, rubles deposited in 
the current operations accounts (so-called "T" accounts) may not be 
converted back into dollars. 
 
The main Russian Government bank involved in trade and investment issues 
is the Bank for Foreign Trade (Vneshtorgbank, or VTB).  Although VTB is 
97 percent owned by the Russian government, the bank does have 
commercial functions.  VTB is the agent of the Russian Government for 
drawing foreign credits for fulfillment of investment projects.  In 
addition, another foreign trade bank, Vneshekonombank (VEB), which was 
declared legally bankrupt at end-1991, still acts as an agent for the 
Russian Government in international banking and to service the foreign 
debt of the former Soviet Union. 
 
Currency Control & Regulation Issues 
 
In the fall of 1993, the Russian Central Bank issued regulations that 
went into effect on January 1, 1994 banning the use of hard currency in 
cash transactions.  Under these regulations, businesses in Russia are no 
longer permitted to accept cash payments in dollars or other hard 
currency, a practice which had become widespread in major cities as 
consumers and storekeepers sought the convenience and security offered 
by a more stable and trusted currency.  Non-cash transactions (e.g. 
credit and debit cards and checks) are not affected by the new 
regulations, so establishments that previously accepted payment via 
credit cards can continue to do so.  Stores that sell imported goods are 
still allowed to mark prices in dollars.  At the time of purchase clerks 
convert the dollar price into rubles.  Through the exchange rate they 
employ, merchants pass on the additional costs they will incur when they 
convert the rubles back into hard currency to restock inventories. 
 
Russian resident entities are still required to convert 50 percent of 
their foreign-currency revenues from exports of goods and services.  The 
foreign currency must be sold through MICEX or any authorized foreign 
exchange dealer.  There has long been discussion in Russian government 
circles of increasing the mandatory exchange obligation from 50 to 100 
percent to further strengthen the ruble, but no such measures have been 
enacted. 
 
The Moscow City Government enacted a 0.1 percent tax on all foreign 
exchange transactions on the Moscow Interbank Currency Exchange (MICEX) 
effective March 1, 1994.  The result has been that a number of banks 
have shifted their exchange activity from MICEX to the off exchange 
market.  Currently, the entire exchange-based market in Russia accounts 
for anywhere from ten to 30 percent of the average daily exchange 
volumes, depending on volatility.  Just as on the MICEX, the CBR now 
intervenes in the off-exchange market to narrow the spread between the 
two markets exchange rates.  In an effort to limit the outflow of 
capital, the Central Bank introduced a computerized export control 
system to monitor the flow of goods out of the country and the flow of 
hard currency bank in.  The system, which unites for the first time 
banking and export controls, requires exporters to obtain a special 
"passport" from a commercial bank, which enters the trade in a computer 
database.  Customs agents register the actual export of the goods in the 
database and the commercial bank  completes the cycle by entering 
receipt of the payment.  Strategic exports, including energy and several 
types of metals, were subject to the new regime as of January 1, 1994.  
The system took effect for all other types of goods on March 1, 1994. 
 
Availability of Financing 
 
The financing environment in Russia remains problematic as the economy 
continues to experience great difficulties, and the Russian government 
and banking system are able to provide little trade and investment 
financing either to Russian companies or foreign firms.  However, a 
number of bilateral and multilateral financing programs, outlined below, 
are open for Russia which could provide more opportunities for traders 
and investors.   
 
How to Finance Exports/Methods of Payment 
 
The fact that the Russian Government has been unable to date to resolve 
the issue of outstanding commercial arrears to western companies 
continues to have a negative impact on the environment for trade 
financing.  Beginning in 1989, Soviet foreign trade organizations began 
have difficulty making payments for goods they had purchased under 
contract from U.S. and other Western companies.  These cases all 
involved imports under open accounts, which had been the standard way of 
doing business in the Soviet Union for decades.  When pressed for 
explanation, the foreign trade organizations claimed sufficient hard 
currency had been deposited in their accounts at the Bank for Foreign 
Economic Relations (Vneshekonombank, or VEB, then the only Soviet bank 
authorized to deal in hard currency), while VEB claimed the FTOs did not 
have sufficient funds to cover the contracts.  The U.S. Government began 
advising U.S. companies only to sign contracts in the Soviet Union, and 
then Russia, on the basis of letters of credit or prepayment. 
 
Since 1990 when U.S. companies first began reporting payments delays, 
the Department of Commerce and other U.S. Government agencies have 
interceded on behalf of more than 70 companies collectively owed more 
than $350 million.  At the end of 1991 the situation grew worse with the 
effective collapse of Vneshekonombank.  In addition to the arrears 
problem, VEB stopped payment on its letters of credit and froze all hard 
currency accounts.  Currently, according to VEB officials, commercial 
arrears stand at $5 billion, frozen accounts at $10 billion, and unpaid 
letters of credit at over $1 billion. 
 
In December 1992 President Yeltsin signed a decree announcing that hard 
currency-denominated bonds with a maturity of three to 15 years and an 
interest rate of three percent would be issued to account holders.  The 
Russian Government began issuing bonds in 1993, and the first tranche 
came due in mid-May 1994 and were paid according to schedule.  Joint 
ventures whose funds were frozen will receive payment in three tranches 
over six years from the date of issuance, and foreign trade 
organizations (who owe U.S. and other Western companies) will receive 
their bond payouts in two tranches over fifteen years.  Estimates are 
that bonds have been issued for sixty percent of the accounts.  
 
Bankers in Russia and the West are actively trading billions of dollars 
of VEB bonds.  Reports indicate that of the sixty percent of VEB bonds 
which have been issued, about $1 billion have been sold on the market.  
If the market for VEB bonds does grow, it may provide a mechanism for 
Western suppliers pursuing repayment of their commercial arrears.  
However, many suppliers are reluctant to accept the VEB bonds as 
repayment for outstanding commercial debt. 
 
In November 1993 then-Deputy Prime Minister Shokhin announced that the 
Ministry of Foreign Economic Relations had been given the authority to 
negotiate the rescheduling of private commercial debts on a country-by-
country basis.  Negotiations would cover unpaid transactions, but not 
frozen accounts or unpaid VEB letters of credit.  More recent reports 
suggest that the Ministry of Finance may be taking the lead on repayment 
of private trade debts with plans to negotiate a single arrangement for 
all foreign companies.   
 
The result of this payments quagmire is that foreign companies now 
generally trade with Russian companies only on the basis of prepayment.  
Letters of credit are issued by Russian banks only in those cases where 
the Russian customer can deposit the requisite funds in its account 
ahead of time, and Western banks generally will only confirm letters of 
credit on that basis as well.  
 
The financing opportunities that do exist primarily are through Western 
government trade and investment programs or new programs under 
international financial institutions. 
 
Types of Available Export Financing and Insurance 
 
U.S. Export-Import Bank 
 
There are several U.S. Government trade financing programs in place 
which can be of assistance to U.S. companies exporting to and investment 
in Russia.  The U.S. Export-Import Bank provides short- and medium-term 
insurance, loan and guarantee support for transactions involving VTB and 
VEB, acting on behalf of the Russian Federation.  Before processing 
applications for sovereign risk transactions, Eximbank requires 
clearance from one of these banks.  A confirmation from the Ministry of 
Finance is needed for medium-term transactions.  As of June 1995, 
Eximbank's overall sovereign risk exposure was approximately $700 
million.  In addition to sovereign risk transactions, Eximbank has 
extended guarantees on a $15 million credit line to Tokobank.   
 
OPIC 
 
In an agreement ratified at the June 1992 Summit, the U.S. Overseas 
Private Investment Corporation (OPIC) is authorized to provide loans, 
loan guarantees, and investment insurance against political risk to 
American companies investing in Russia.  OPIC generally insures against 
three political risks:  expropriation, political violence and currency 
inconvertibility.  In June 1995 OPIC announced that it would begin 
offering currency inconvertibility insurance on a limited basis. 
 
In 1994, to meet the demands of larger projects in Russia (and 
worldwide), OPIC doubled the amount of insurance and quadrupled the 
amount of finance support -- to $200 million in each case -- it can 
commit to an individual project.  Through the midpoint of fiscal year 
1995 (March, 1995), OPIC had committed over $2.2 billion in finance and 
insurance to 41 projects in Russia.  Total investment into these 
projects should reach $3.4 billion.  In December 1994, OPIC also 
committed to provide up to $500 million to support defense conversion 
projects. 
 
In addition to its support for 36 individual projects, OPIC is providing 
support for 5 investment funds, 4 of which can invest throughout the NIS 
as well as in Russia.  In Russia itself, OPIC has committed to providing 
loan guarantees for more than 70 percent of the $155 million 
capitalization of the Russia Partners Fund, a direct investment fund for 
Russia organized and managed by a subsidiary of Paine Webber.  The State 
Investment Corporation of Russia also contributed $5 million of the 
total capitalization.  The fund will be able to invest between $2 and 15 
million in Russian companies that are hard-currency generators or 
involved in export production businesses across a broad spectrum of 
industries.  The fund will also provide capital for expansions of 
successful projects. 
 
For more information on OPIC programs, call 1-800-424-OPIC or (202) 336-
8799, or fax (202) 408-9859. 
 
MIGA 
 
The Multilateral Investment Guarantee Agency, which is part of the World 
Bank group, seeks to promote international private investment by 
providing political risk insurance for eligible foreign investors.  Its 
guarantee program insures investors against losses from currency 
transfer, expropriation, war and civil disturbance and investment-
related breach of contract by host governments of developing countries.  
MIGA cooperates closely with OPIC and other national investment 
insurance agencies as well as with private insurers to co-insure or 
reinsure eligible foreign investments.  
 
Russia became a member of MIGA in December 1992.  MIGA cooperates with 
the IFC and IBRD in supporting the World Bank Group's Foreign Investment 
Advisory Service, which has been providing assistance to the Russian 
Agency for International Cooperation and Development. 
 
TDA 
 
In addition, the U.S. Trade and Development Agency (TDA) offers funding 
for Russia.  TDA provides funding for U.S. firms to carry out 
feasibility studies, consultancies and other planning services related 
to major projects.  While historically TDA projects have been public 
sector projects, planned by government ministries or agencies, 
increasingly TDA now considers both public and private sector projects.  
Where appropriate, TDA may provide funding for training programs, 
technical seminars, conferences, or orientation visits to the United 
States.  Since it began operating in Russia in early 1992, TDA has 
funded about 85 feasibility studies and other activities totaling more 
than $28 million.  For more information on TDA programs, please contact 
Daniel Stein, Regional Director, at (703) 875-4357 or by fax at (703) 
875-4009. 
 
USDA 
 
The U.S. Department of Agriculture specializes in financing agricultural 
exports and has nearly $6 billion in annual authorizations, the bulk of 
which is provided through the Commodity Credit Corporation (CCC).  
Historically, the CCC has financed large amounts of wheat and other 
agricultural commodities to the NIS.  CCC operates an export credit 
guarantee programs known as GSM-102 which guarantees market-rate 
financing based on irrevocable letters of credit from an eligible 
foreign bank.  USDA also operates a number of food aid programs 
including the Food for Progress Program that comprises mostly medium-
term concessional credit sales of agricultural commodities.  Since 1991, 
the CCC has guaranteed over $5 billion in private U.S. bank loans to the 
NIS, which have helped facilitate purchases of over 33 million tons of 
agricultural commodities.   
 
Project Financing 
 
EXIMBANK 
 
In addition to its export financing activities, Eximbank will also 
consider transactions with security based on production payments or hard 
currency export sales by Russian industries, as well as applications 
involving limited recourse project financing in the Russian Federation.  
Integral to Eximbank's project finance is a Project Incentive Agreement 
(PIA) signed in December 1993 which calls for the Russian Government to 
recognize Eximbank's interests in specific projects and to pledge non-
interference with project operations. 
 
In July 1993 Eximbank signed an Oil and Gas Framework Agreement under 
which Eximbank may provide financing for $2 billion or more for U.S. 
exports of oil and gas production equipment and services to rehabilitate 
and revitalize the Russian energy sector.  Under the Framework 
Agreement, Eximbank will finance equipment and services for Russian oil 
and gas production facilities which are now closed or producing below 
capacity; no new facilities will be eligible.  Repayment security will 
be provided by hard currency receipts from oil export contracts 
deposited in escrow accounts outside Russia and dedicated to service 
debt owed to Eximbank.  Repayment terms are five years (or possibly 
longer if appropriate) and the minimum amount of financing for each 
transaction is $25 million.  As of June 1995 Eximbank's exposure under 
the Oil and Gas Framework Agreement was $1.3 billion.  For more 
information on Eximbank programs please contact (202) 566-8990. 
 
USAID 
 
The U.S. Agency for International Development (USAID) receives funding 
for assistance activities in the Newly Independent States (NIS) under 
the Freedom Support Act.  Working in conjunction with other U.S. 
Government agencies, USAID provides financial and human resources to 
Russia in support of three strategic goals: 
--  Economic Restructuring -- Fostering the emergence of a competitive, 
market-oriented economy in which the majority of economic resources are 
privately owned and managed; 
--  Democracy -- Supporting the transition to transparent and 
accountable governance and the empowerment of citizens through 
democratic political processes; and 
--  Social sector restructuring -- Strengthening the capacity to manage 
the human dimension of the transition to democracy and a market economy 
and helping to sustain the neediest sectors of the population during the 
transition period. 
 
By the end of 1994, USAID had contributed nearly $1.3 billion in 
technical and project assistance overall, with more than half targeted 
on the first goal, the emergence of a market economy.  An additional 
$250 million is being programmed in 1995 to continue key activities.  
Economic restructuring support seeks:  the transfer of state-owned 
assets to the private sector; the establishment of a policy, legal and 
regulatory framework conducive to competitive, private sector growth; 
the development of private sector enterprises; the establishment of a 
fiscal regime appropriate to a market economy; a competitive, efficient 
private financial sector; and the sustainable use of natural resources, 
a principle source of Russia's wealth.  Mass privatization of more than 
14,000 medium to large scale enterprises has opened the door for new 
investment in businesses with some experience and track records. 
Business service centers and other business service firms established in 
several cities under USAID auspices have catalyzed the start-up of 
hundreds of new businesses as well, provided training, consulting 
services and support in the form of business incubators, leasing 
programs, etc.  A Commodity Import Program, intended to familiarize 
Russian industries with technology for energy and environmental 
conservatism, is just getting rolling in mid-1995 but should open up new 
opportunities for U.S. exporters. 
 
For general information on the NIS programs and other USAID initiatives, 
contact USAID's Program Office at (202) 647-8094 or USAID's Center for 
Trade and Investment Service at 1-800-USAID-4-U or (202) 663-2660, by 
fax at (202) 663-2670.  USAID also has a fully staffed office in Moscow 
and can be reached at by phone at 7-095-956-4281 or 956-7092 or by fax 
at 7-095-956-7093.     
 
EBRD 
 
The European Bank for Reconstruction and Development is a multilateral 
financial institution that lends and invests exclusively in the 
countries of central and Eastern Europe and the NIS.  EBRD supports 
projects that help develop the private sector, foster privatization, 
increase direct foreign investment, create and strengthen financial 
institutions, restructure the industrial base, build a modern 
infrastructure, promote small and medium-sized businesses, and improve 
the environment. EBRD's charter mandates at least sixty percent of its 
lending for the private sector and for privatization of state-owned 
enterprises.  The remaining resources will fund public infrastructure 
and environmental projects that promote private sector development. 
 
The EBRD began its operations in the Russian Federation in September 
1991.  Within the rapidly growing private sector of the country, the 
Bank's strategy concentrates on key areas where it can have the greatest 
impact using limited resources.  The total cost of a typical project is 
more than $15 million, with the EBRD funding up to 35 percent.  As of 
May 31, 1995 the Bank had approved $1.4 billion of financing for 43 
projects in Russia.  Nearly 40 percent of these funds were for oil and 
gas projects.  The remaining projects were spread out over a variety of 
sectors, including energy, agribusiness, telecommunications, banks, 
aerospace and transport. 
 
A key component of the EBRD's strategy is to help develop local banking 
and financial institutions.  By channeling financing through Russian 
banks, small and medium-sized enterprises (SMEs) are able to obtain 
financing at rates and maturities not available before.  Together with 
the World Bank, the EBRD is developing the Financial Institutions 
Development Program, which will involve up to 40 Russian on-lending to 
recently privatized enterprises. 
 
Strengthening private sector development has meant increasing post-
privatization efforts, continuing support for the implementation of 
privatization and expanding the support of SMEs.  To implement this 
strategy, the Bank has developed indirect financing methods, using local 
financial institutions as intermediaries for Bank financing.  For 
example, 5 Regional Venture Funds are in place (with 6 more in the 
planning stages) to provide new capital to help restructure privatized 
enterprises, with parallel technical assistance for project preparation, 
implementation and monitoring. 
 
Firms seeking involvement in EBRD-funded projects may contact Sarah 
Shackelton in the U.S. Executive Director's Office in London at 44-171-
338-7532 or by fax at 44-171-338-6487.  
 
U.S.-Russia Investment Fund 
(formed as a merger of the Russian-American Enterprise Fund and the Fund 
for Large Enterprises) 
 
The U.S.-Russia Investment Fund is a merger of the Russian-American 
Enterprise Fund and the Fund for Large Enterprises, which were both 
funded by the U.S. Agency for International Development.  As a result of 
the merger, there are two separate functions of the Fund:  (1) to assist 
small and medium-sized privatized or privatizing Russian enterprises (up 
to 2,500 employees) by providing equity investments and loans, technical 
assistance in limited circumstances, and trade financing through short-
term loans; and (2) to offer financing packages including equity 
investments, loans and technical assistance and training to medium and 
large sized enterprises (from 1,000 to 10,000 employees).  For more 
information contact the Fund's New York office at (212) 668-8391 or the 
Moscow office at 7-095-929-9888 or fax 7-095-929-9828.    
 
Defense Enterprise Fund 
 
The 1994 Defense Appropriations Bill authorizes the Department of 
Defense to establish a $40 million Demilitarization Enterprise Fund 
(DEF).  DEF will promote private sector investment and restructuring in 
the Russian defense industry.  The DEF has been set up as a private 
nonprofit corporation with a board of directors appointed by the 
President.   
 
Investments will be diversified among smaller enterprises or spin-off 
enterprises derived from larger defense enterprises, large enterprises 
that have converted or are in the process of converting, and start-ups 
formed by formerly defense or military personnel.  For more information 
contact Mr. Arthur Sweeney at the Demilitarization Enterprise Fund at 
tel. (804) 281-2129 or at fax (804) 281-2245.    
 
IBRD 
 
The International Bank for Reconstruction and Development (IBRD), part 
of the World Bank group, makes long-term loans at market-related rates 
primarily to developing nations, and in recent years its scope of 
activity has expanded to include Eastern Europe and the NIS.  The IBRD 
works to promote broadly based economic growth and frequently focuses on 
structural adjustment, sectoral reform and individual project lending.  
Typically the Bank does not finance the entire cost of a project.  
Rather, it finances the components of a project purchased with foreign 
exchange, which on average is about 40 percent of the total project 
cost.  Each project may cover a wide variety of sectors and can involve 
anywhere from one to hundreds of separate contracts of export business 
opportunities for suppliers worldwide.  
 
Russia became a member of the IBRD in June 1992.  The IBRD's financial 
support and policy advice will continue to focus on structural and 
institutional reforms to promote economic stability and self-sustaining 
growth.  Priority will be given to restoring the energy and agricultural 
sectors, privatizing productive enterprises, developing a functioning 
commercial financing system and developing a social safety net to 
protect the most vulnerable groups.  For more information on IBRD 
activities in Russia please contact Tom Kelsey at (202) 482-4332 or 
(202) 458-0118 or by fax at (202) 477-2967. 
 
IFC 
 
Russia also became a member of the International Finance Corporation in 
April 1993.  The IFC, an independent member of the World Bank Group, is 
the largest source of direct project financing for private investment in 
developing countries.  IFC invests in commercial enterprises of varying 
industries by means of loans and equity financing in collaboration with 
other investors.  IFC does not require government guarantees of 
repayment.  In addition to funding, IFC also provides financial, legal 
and technical advice to private enterprises. 
 
IFC has been involved in a number of projects in Russia, including two 
oil and gas projects, a credit line to Russia's leading commercial bank 
and funding to a venture capital fund to invest in privatized 
enterprises.  The IFC has also been particularly active in assisting 
Russia in its privatization and economic restructuring efforts.  
Companies wishing to make project proposals or to obtain additional 
information should contact the IFC's Business Development Department at 
(202) 473-1950. 
 
There are a number of other private sources of financing available for 
Russia.  For a more complete listing please contact the BISNIS office in 
the U.S. Department of Commerce at (202) 482-4255. 
 
List of Banks with Correspondent U.S. Banking Arrangements* 
 
Moscow 
 
Avtovazbank:          Chase Manhattan Bank 
                      Bank of America 
 
Credit Moscow Bank:   Republic National Bank of New York 
                      Bank of New York 
                      American Express Bank 
 
Credo Bank:           Bank of America 
                      Republic National Bank of New York 
 
 
Finist Bank:          Bankers Trust 
                      Citibank 
 
Inkombank:            Republic National Bank of New York 
                      Bankers Trust 
                      Citibank 
                      BankAmerica 
 
Moscow Business Bank: Bankers Trust 
                      Republic National Bank of New York 
                      Bank of America 
 
Rossiyskiy Credit  
  Bank:               Citibank 
 
Sberbank:             Bank of New York 
 
Stolichniy Bank:      Bank of America 
                      Bank of New York 
                      Republic National Bank of New York 
 
Tokobank:             American National Bank and Co. of Chicago 
                      BankAmerica 
                      Bank of America 
                      Bank of New York 
                      Chase Manhattan Bank 
                      Republic National Bank of New York 
                      United States National Bank of Oregon 
 
Vserossiyskiy 
Birzhevoy Bank:       BankAmerica 
                      Republic National Bank of New York 	 
 
St. Petersburg 
 
Bank St. Petersburg:  Bankers Trust 
                      Bank of New York 
 
St. Petersburg 
Promstroybank:        Bankers Trust 
                      Bank of New York 
 
Baltiyskiy Bank:      Bankers Trust 
                      Bank of New York 
 
Petrovskiy Bank:      Bankers Trust 
                      Bank of New York 
 
Russian Far East 
 
Dalnevostochny Bank:  Bank of America 
                      U.S. Bank (Oregon) 
 
Dalrybbank:           Riggs Bank 
                      First Interstate Bank (Oregon) 
                      First National Bank of Anchorage 
 
Evrobank:             Bank of America 
                      First Interstate Bank (Oregon) 
 
Vneshtorgbank:        U.S. National Bank of Oregon 
 
Regiobank:            Bank (Oregon) 
 
*  This list is not exhaustive. 
 
IX.  BUSINESS TRAVEL 
 
Business Customs 
 
Attempts to understand Russian business customs must always be rooted in 
the knowledge that Russia has lived for over a thousand years under 
authoritarian and autocratic rule.  Unlike other countries in Eastern 
Europe such as Hungary, Poland and East Germany, Russia has no 
institutional memory of democracy or market economy. 
 
In these rapidly changing times, it is difficult to generalize the 
business customs of this vast country, but the following are some of the 
most commonly followed customs. 
 
Russian business revolves around a system of unequaled red tape.  
Stamps, forms and signatures comprise a frustrating maze for western 
business which often sees no point in the exercise.  Patience, long 
suffering and often the goodwill of Russian partners is the only key to 
success.  Documents carefully notarized in the United States attesting 
the bank accounts or viability of a company will often be rejected by 
Russians.  American business will be asked for notarization by the 
American Embassy.  Though the Embassy can only notarize that the 
requestor states the documents are authentic, this is what seems to 
satisfy Russians. 
 
Russian businesses place a very high value on personal interaction and 
relationships.  Business is rarely conducted on the phone, and decisions 
are almost exclusively reached in face-to-face negotiations.  Such 
meetings usually begin with an exchange of business cards (it is helpful 
to have yours also printed in Russian) and progress through serious, 
seemingly endless speeches accompanied by tea and cookies early in the 
day or vodka toasts for later meetings.  When invited for dinner 
meetings, the evening can often be very long and seemingly unproductive, 
but may be the necessary groundwork for an agreement signed at a later 
date. 
 
Russians put great stock in personal relations.  A hand shake may be 
more binding for them than the actual signed agreement.  Contract 
sanctity is not a well institutionalized concept in Russia with the 
signatory or with Russian courts.  The Embassy knows of cases where 
Russian businesses simply abrogated signed contracts when difficulties 
arose or they deemed the contract no longer advantageous to their side. 
 
Western business persons should be aware, though, that Russians are 
zero-sum thinkers.  Though westerners expect negotiations to result in 
win-win agreements for both sides, Russians often think that they can 
only win in a negotiation if the other side loses.  To succeed in 
business, Russians often have to scheme and plot ways to circumvent 
rules and find loopholes in government regulations.  Often Russian 
businesses allow this approach to spill over into negotiations with 
private persons and firms. 
 
Travel Advisory and Visas 
 
The State Department issues travel advisories when political unrest 
warrants.  In the past two years only during the October unrest of 1993 
were visitors warned to avoid travel to Moscow for about two weeks. 
 
Military conflict continues in the Chechen Republic, and the Ingush 
Republic and the North Ossetian Republic also witness frequent armed 
violence.  Political problems continue in the North Caucasus region of 
Southern Russia and along Russia's border with Azerbaijan and Georgia.  
These areas should generally be avoided if possible. 
 
A passport and a Russian visa are needed to travel to Russia.  This visa 
must be obtained before leaving the United States and the cost of visas 
depends on the amount of time allowed for processing.  Given a month's 
notice, a Russian visa theoretically costs $20.  When asking for very 
fast service, a Russian visa can cost 100 dollars or more.  Business 
travelers must have a letter of invitation from a Russian individual or 
organization which serves as the sponsor.   
 
Visas of short duration are stamped with exit dates which must be 
strictly observed.  Allowing a Russian visa to expire can result in 
heavy fines and tedious work with the bureaucracy for permission to 
leave the country.  If the visa is for a prolonged stay, then an exit 
visa must be obtained by the traveler's sponsor after his arrival in 
Russia. 
 
If travelers stay more than three days in Russia, they must register 
their visa through their hotel or their sponsor.  Failure to do so can 
result in grave difficulty in leaving the country.  Travelers should 
ensure that their visa is in order before leaving the United States. 
 
Americans can receive assistance from the Russian Embassy, Consular 
Division, 1825 Phelps Place, NW, Washington, DC, 20008.  The Russian 
Embassy can be reached at (202) 939-8907.  Travelers can also receive 
assistance from the Russian Consulates in New York, San Francisco or 
Seattle. 
 
Holidays 
 
Russian holidays include: 
 
Jan 1             New Year's Day 
Jan 7             Orthodox Christmas 
Mar 8             International Women's Day 
May 1             International Labor Day 
May 2             Spring Day 
May 9             Victory Day 
June 12           Independence Day 
Nov 7             Revolution Day 
Dec 12            Constitution Day 
 
In the event holidays occur on weekends, Russian authorities announce 
during the week prior to the holiday, if the day will be celebrated on 
the following Monday.   
 
Business Infrastructure	 
 
Air transport to Russia on western airlines is becoming more accessible 
all the time.  Several western airlines fly daily to Moscow and St. 
Petersburg.  New flights on Lufthansa have been initiated to 
Yekaterinburg and Novosibirsk.  Alaska Airlines has summer flights to 
Magadan, Khabarovsk and Vladivostok.  All major Russian cities can be 
reached from Moscow via Aeroflot, and increasingly the joint venture 
airline Transaero (which has service approaching western-standard and 
which flies Boeing aircraft) is flying to a number of key Russian cities 
from Moscow. 
 
Moscow has four major airports which ring the city.  International 
flights enter Moscow through Sheremetyevo II and travelers may continue 
to other Russian cities through any of the other three airports.  Travel 
time to the departure airport can be as much as an hour and a half from 
Sheremetyevo II, and ample time must be allowed for passport control, 
customs clearance and baggage retrieval.  A new taxi service has been 
initiated at Sheremetyevo II which is highly recommended.  You can pay 
the set rate and avoid hassles with free lance taxi drivers. 
 
The St. Petersburg airport (Pulkovo) has two terminals:  Pulkovo I 
(domestic flights) and Pulkovo II (international flights).  Pulkovo II 
handles 70 flights per day and is serviced by major European and 
American carriers, including Delta, Lufthansa, British Airways, KLM and 
Finnair.  The domestic terminal, which is located ten minutes by car 
from the international terminal, handles flights to all major Russian 
cities, including several flights daily to Moscow.  Both terminals are 
located relatively close to the city, approximately 40 minutes by car 
from downtown St. Petersburg.  There are taxi dispatchers at the airport 
to supervise taxi service; in addition, the major hotels as well as the 
American Express office run limousine services for airport transfers. 
 
Travelers should not expect western standards on Russian airlines.  With 
the breakup of Aeroflot into many small airlines, travel within Russia 
is often unreliable.  Domestic air travelers must often cope with 
unpredictable schedules and difficult conditions including deterioration 
of centralized systems of maintenance and quality of service, as well as 
overloading.   
 
Western travelers will be required to pay a higher rate for their 
tickets and will generally be seated in the front cabin.  This is not 
"first class".  Travelers will find cramped, sometimes unsanitary 
conditions with very little space for carry on luggage.  Though food and 
beverages are now sometimes served on internal flights, it often pays to 
bring your own refreshment if you think you will be hungry.  As noted 
above, Transaero is a good alternative to Aeroflot for those cities it 
serves. 
 
An alternate method of getting around inside Russia is to travel by 
train.  For cities as close as St. Petersburg, travelers can generally 
ride night trains.  Trains generally arrive in the center of the city 
and save many of the baggage hassles that accrue in air travel.  Trains 
are also far more reliable, since flights are often canceled for lack of 
fuel.  Unfortunately, increased incidents of theft and other crimes on 
trains has made this mode less safe -- especially for unaccompanied 
passengers.  
 
Car travel is not advised except for the cities very close to Moscow.  
Roads are often in very poor condition and fuel is sometimes very 
difficult to obtain. 
 
Within Moscow and St. Petersburg the metro system provides an excellent, 
inexpensive means of transportation.  Most major attractions in the city 
are very close to metro stops.  Signs are all written in Russian, so it 
can be challenging especially if you must change lines at any point.  Be 
sure you can recognize the spelling of all destinations before embarking 
on a metro adventure. 
 
Marked taxis in Moscow and St. Petersburg are often scarce.  Russians 
simply stand on the side of the street and put out their hand for a 
ride.  It often takes only a minute to find someone willing to drive 
you.  As in other big cities, you are taking a certain risk in using 
this method, especially if you are alone, or it is after dark.   Be sure 
to negotiate the fee before you get in the car, and never get in a car 
occupied by more than just the driver. 
 
Crime 
 
Though crime in Moscow, St. Petersburg and other major cities is said to 
be no worse than in some major cities of America, crime here is often 
targeted against foreigners since they are easily identified and 
perceived to be lucrative targets.  Travelers should "dress down", and 
avoid loud conversation calling attention to themselves. 
 
Pickpocketing and muggings sometimes occur in broad daylight.  Americans 
should exercise particular caution in airports, open markets, near major 
train and metro stations, and when hailing taxis.  Groups of children 
who beg money sometimes pickpocket and assault tourists.  Foreigners' 
hotel rooms and residences have also been targets, and some victims have 
been seriously assaulted during robberies.   
 
Extortion and corruption permeate the business environment in Russia.  
Organized criminal groups target foreign businesses in many Russian 
cities and demand protection money (under threat of serious violence).  
Many western companies hire security services, but this has not always 
been proven effective in avoiding armed extortion attempts. 
 
Language 
 
Many Russian entrepreneurs can speak at least some English.  If your 
business is outside of Moscow and St. Petersburg or if you are dealing 
with large factories or institutes, it may be more difficult to find 
English speakers.  For important negotiations U.S. businesses may want 
to hire a reputable interpreter.  Russian interpreters often specialize 
in certain technical areas like oil and gas or biotechnology, for 
example. 
 
Hotels  
 
Moscow, St. Petersburg, Novgorod, Sochi and Vladivostok have western 
style hotels.  Most will cost $200/night or more.  Russian state hotels 
often provide only the barest necessities and charge foreigners over a 
hundred dollars for rooms that may not even have hot water.  
 
Clothing 
 
Winters can be extremely cold in Russia with temperatures in the minus 
30 range not unusual.  Winter clothes can be needed as early as October 
and as late as April.  Waterproof footwear is a must all year round, and 
rain gear is highly recommended from April to October. 
 
Health 
 
Diphtheria outbreaks have been reported throughout Russia. Travelers 
should be certain that all immunizations are up-to-date, especially 
their diphtheria and typhoid shots.  Travelers should drink only boiled 
or bottled water throughout Russia.   Current advisories can be obtained 
from the Center for Disease Control's International Travelers' Hotline.  
Tel: (404) 332-4559. 
 
Medical Facilities 
 
Medical care in Russia, even in the major cities, is often far below 
Western standards, with severe shortages of basic medical supplies.  
Access to the few quality facilities in major cities usually requires 
cash dollar payment at Western rates upon admission.  The US Embassy and 
Consulates maintain lists of such facilities and of English speaking 
doctors.   
 
Many Americans living in Russia travel to the West for virtually all of 
their medical needs; such travel can be expensive if undertaken under 
emergency conditions.  Travelers should know their insurance coverage 
and consider supplemental coverage for medical evacuation.  Elderly 
travelers and those with existing health problems may be at particular 
risk. 
 
Food 
 
In the past local food was a great bargain in Russia.  This is still the 
case in many restaurants in cities outside of the main cities.  
Currently, most Russian restaurants in Moscow and St. Petersburg charge 
as much if not more than western restaurants for food that is often of 
lower quality.  Weekly the number of western restaurants increases. 
 
Currency Exchange 
 
Travelers' checks are not widely accepted in Russia, credit cards are 
only accepted at establishments catering to westerners in major cities; 
old or worn dollar bills (or bills with anything written on them) are 
often not accepted even at banks. 
 
In Moscow automatic tellers for American Express credit cards are 
located at the American Express Office and at the Mezhdunarodnaya 
(International) Hotel; an automatic teller for Visa cards is located at 
the Metropol Hotel.  Dialog Bank at the Radisson Hotel provides cash 
advances for Mastercard holders, and cashes personal checks for American 
Express card holders.  The American Express offices in Moscow and St. 
Petersburg can cash American Express Travelers' checks, and personal 
checks for card holders.  The St. Petersburg American Express Office can 
provide cardholders with cash advances up to $500.  In St. Petersburg 
Promstroybank, Bank St. Petersburg and Baltiyskiy Bank provide cash 
advances for all major types of international credit cards and cash 
traveler's cheques.  Western Union has agents in Moscow, St. Petersburg 
and some other large cities which can disburse money wired from the 
United States. 
 
Customs Regulations 
 
Russian customs laws and regulations are in a state of flux and are not 
consistently enforced.  A 600 percent duty is required to export any 
item with a value greater than 300,000 rubles (customs officials decide 
the value of what you purchased).   
 
All items of historical or cultural value (icons, rugs, old books, 
antiques, art, etc. may only be taken out of the country with prior 
written approval of the Ministry of Culture and a payment of 100% duty. 
 
Caviar may be taken out of Russia only with a receipt indicating that it 
was bought in a store licensed to sell to foreigners.  Failure to follow 
customs regulations may result in temporary or permanent confiscation of 
the property in question. 
 
 
APPENDIX A 
 
COUNTRY DATA\1 
 
Population: 148.3 million people (January 1, 1995) 
Population Growth Rate: 0% 
Religions: Russian Orthodox, Islamic, Jewish, Catholic, Protestant, 
Buddhist, Other 
Government System: Federal with 87 republics, territories, regions and 
autonomous areas 
Languages: Russian (official), over 140 other languages and dialects  
Work Week: 40 hours per week 
 
APPENDIX B 
 
DOMESTIC ECONOMY 
 
                                   1994        1995        1996\3 
 
GDP (Ruble Trillions)\2             630        1450 
GDP Growth Rate                     -15%         -9% 
GDP Per Capita (Rub. Thous.)       4256        9797 
Government Spending 
  as percent of GDP                  37          33 
Inflation (Avg. Annual)              878        303 
Unemployment (percent)                 7.1        7.9 
Foreign Exchange Reserves 
  (USD billion)                        4          2 
Average Exchange Military Rate      2205       3550 
Foreign Debt (USD Billion)            80        130 
Debt Service Ratio                    27.4       24.4 
  (before rescheduling) 
U.S. Economic/ 
  Assistance\4                      1611         343 
 
APPENDIX C 
 
TRADE 
(Billions of USD)\5  
 
                                   1994        1995        1996\3 
 
Total Country Exports                43.9        47.1 
Total Country Imports\6              33.1        34.5 
U.S. Exports to Russia\7          2,579       2,837 
U.S. Imports from Russia\7        3,235       5,000 
 
\1 - Source: Russian State Statistics Committee (GOSKOMSTAT) 
\2.- The rapid depreciation of the ruble in 1994 and early  995 makes it 
meaningless to delineate this data in dollar terms. 
\3 - Figures for 1996 cannot be predicted with any degree of 
reliability.  1995 figures are U.S. Embassy or officials estimates. 
\4 - Millions of U.S. dollars.  In addition, 1.2 billion U.S. dollars 
were appropriated for fiscal years '92-'94 in military assistance.   
\5 - Excluding CIS countries. 
\6 - Includes an estimate of shuttle or informal trade. 
\7 - Source: U.S. Department of Commerce  
 
 
APPENDIX D 
 
FOREIGN INVESTMENT STATISTICS 
 
Estimates of the amount of foreign investment in Russia vary widely.  
According to Goskomstat, Russia had accumulated foreign investment of 
about USD 4 billion by the end of 1994, representing some 16,036 firms 
with foreign participation.  Goskomstat puts foreign direct investment 
in 1994 at USD 1 billion.  Portfolio investment is estimated at USD 200 
million.  About 50 percent of 1994 foreign investment was in the 
country's fuel industry.  Geographic areas receiving the most foreign 
money included Arkhangelsk, Moscow, Irkutsk, Tyumen and the Komi 
Republic. 
 
Statistics from the Russian Government indicate that the following 
countries are leading investors in Russia: 
 
 
Country                    Pct. TTL         RUBLES MILL       # FIRMS 
 
United States              24.1               30,967             872 
Hong Kong                   6.9                8,810              66 
Switzerland                 5                  7,465             195 
Canada                      4.0                5,090             126 
United Kingdom              3.3                4,208             361 
Spain                       3.2                4,152              72 
Turkey                      3.2                4,133              75 
Belgium                     2.8                3,547              76 
PRC                         2.5                3,166             311 
 
 
Appendix E 
 
U.S. AND RUSSIAN CONTACTS 
 
Russian Government Agencies 
 
Oleg Dmitriyevich Davydov 
Deputy Prime Minister and Minister of Foreign Economic Relations 
Co-chair, U.S.-Russia Intergovernmental Business 
  Development Committee (BDC) 
Krasnopresnenskaya Nab., 2 
Tel: (095) 205-5122 
Fax: (095) 205-4318 
 
Aleksandr Kharlamplyevich Zaveryukha 
Deputy Prime Minister of the Russian Federation 
(oversees agriculture) 
Krasnopresnenskaya Nab. 2 
Moscow 
Tel: (095) 205-5058 
Fax: (095) 205-6910 
 
Ministry of Foreign Economic Relations 
Nikolay Ustinovich Drozdov, Deputy Minister 
32/34, Smolenskaya-Sennaya Ploshchad 
Moscow 121200  
Phone: (095) 244-3690 
Fax:   (095) 244-1600 
 
Ministry of Finance 
Vladimir Grigoriyevich Panskov, Minister 
Ulitsa Ilyinka 9, Entrance 1 
Moscow 
Tel: (095) 923-3456 
Fax: (095) 925-0889 
 
Ministry of Fuel and Energy 
Anatoliy Tikhonovich Shatalov, Deputy Minister 
7, Kitaysky Proezd 
Moscow 103074 
Phone: (095) 220-5252 
Fax:   (095) 220-5656 
 
Ministry of Agriculture 
Aleksandr Grigoriyevich Nazarchuk, Minister 
Orlikov Pereulok, 1/11 
Moscow 
Tel: (095) 207-4243 
Fax: (095) 207-8362 
 
State Customs Committee 
Anatoliy Sergeyevich Kruglov, Chairman 
1a, Komsomolskaya Ploshchad 
Moscow 107842 
Phone: (095) 975-3289 
Fax:   (095) 975-4823 
 
State Committee for Standardization, Metrology and Certification 
Sergey Fyodorovich Bezverkhiy, Chairman 
9, Leninskiy Prospekt 
Moscow 117049 
Phone: (095) 236-6208, -4044 
Fax:   (095) 236-6231, 237-6032 
 
Russian Copyright Agency 
Georgiy Artashessovich Ter-Gazariyants, Chairman of the Board;  
Vadim Serafimovich Dunin, Head 
Foreign Relations Department 
6a, Bolshaya Bronnaya Ul. 
Moscow 103670 
Phone: (095) 203-2996, -4599 
Fax:   (095) 200-1263 
 
Committee of the Russian Federation for Patents and Trademarks 
Vitaliy P. Rassokhin, Chairman 
2/6 Cherkasskiy Pereulok 
Moscow 
Tel: (095) 206-6203 
Fax: (095) 923-4093 
 
State Investment Corporation 
Yuriy Vladimirovich Petrov, Chairman 
35, Myasnitskaya Ul. 
Moscow 103685 
Phone: (095) 925-6796 
Fax:   (095) 207-6936 
 
Moscow Registration Chamber 
Vladimir Ivanovich Sobolyov, Chairman 
Mokhovaya Ul., 11, Bld. 8-E 
Moscow 103009 
Phone/Fax: (095) 202-2787 
Roald Nestorovich Lebedinskiy, Director for  
  Registration/Accreditation Service (Information in English) 
Phone: (095) 132-0500  
Tatyana Kuzminichna Nikanorkina, Expert on Registration 
  of Companies with Foreign Capital (Russian) 
Phone: (095) 202-4042 
 
St. Petersburg Mayor's Office 
Aleksey B. Miller, Chief of Department 
External Affairs Committee 
1, Smolniy 
St. Petersburg 
Phone: (812) 271-0767 
Fax:   (812) 278-1633 
 
Igor Sorokin 
Deputy Chairman 
Committee on Economy and Finance 
16, Vosnessenskiy Prospekt 
St. Petersburg 
Phone:  (812) 319-9747 
        (812) 319 9554 
 
Ina L. Bigotskaya 
Expert, Foreign Affairs Ministry 
67, Suvorovskiy Prospekt 
St. Petersburg 
Phone: (812) 274-4759 
Fax:   (812) 274 5986 
 
Foreign Economic Relations Department 
Yekaterinburg Regional Administration 
Igor Ivanovich Arzyakov, Director 
1, Oktyabrskaya Ploshchad' 
Yekaterinburg 620031 
Phone: (3432) 51-54-97, 58-96-56 
Fax:   (3432) 51-98-70 
Telex: 721721 MORZ 
 
Foreign Economic Relations Department 
Yekaterinburg City Administration 
Vladimir Ippolitovich Lomovtzev, Director 
1, Oktyabrskaya Ploshchad' 
Yekaterinburg 620031 
Phone: (3432) 51-13-07, 51-43-83 
Fax:   (3432) 51-90-05 
 
Primorskiy Territorial Administration 
Committee for Foreign Economic Relations 
  and Regional Trade 
22, Svetlanskaya Ulitsa 
Vladivostok 
Andrey Zaumyonnov, Chairman 
Phone: (4232) 22-79-37 
 
Khabarovsk Territorial Administration 
Foreign Economic Relations Department 
Sergey Lopatin, Chief 
19, Muravyov-Amurskiy Ul., Khabarovsk 
Phone: (4212) 33-41-21 
 
Sakhalin Territorial Administration 
Vladislav Rukavets, Commissioner for 
     Foreign Economic Relations 
39, Kommunisticheskiy Prospekt 
Yuzhno-Sakhalinsk, Sakhalin 
Phone: (42422) 34-908 
 
State Duma (Parliament) 
 
Committee on Budget, Taxes, Banking and Finance 
Mikhail Mikhailovich Zadornov, Chairman 
2, Georigiyevskiy Pereulok 
Moscow 
Tel: (095) 229-5586 
Fax: (095) 229-5601 
 
Committee for Economic Policy 
Sergey Yuriyevich Glaziyev, Chairman 
2, Georgiyevskiy Pereulok 
Moscow 
Tel: (095) 292-4260 
Fax: (095) 292-4622  
 
Committee on Property, Privatization and Economic Activity 
Sergey Vasiliyevich Burkov, Chairman 
2, Georgiyevskiy Pereulok 
Moscow 
Tel: (095) 229-9559 
Fax: (095) 229-6996 
 
Committee on Industry, Construction, Transport and Energy 
Vladimir Kuz'mich Gusev, Chairman 
2, Georgiyevskiy Pereulok 
Moscow 
Tel: (095) 229-0365 
Fax: (095) 229-9991 
 
Trade Associations/Chambers of Commerce in Russia 
 
American Chamber of Commerce 
Peter Charow, Executive Director 
Suite 737, Slavyanskaya-Radisson Hotel 
2, Berezhkovskaya Nab. 
Moscow 121151 
Phone: (095) 941-8435 
Fax:   (095) 941-8437 
 
American International Business Association of St. Petersburg 
Lucas Angell, Executive Administrator 
57 Bolshaya Morskaya 
St. Petersburg 
Tel: (812) 110-6042 
Fax: (812) 311-0794 
 
Council for Trade and Economic Cooperation (CIS-USA)  
Boris Petrovich Alekseyev, President 
3, Naberezhnaya Shevchenko 
Moscow 121248 
Phone: (095) 243-5514, -5470 
Fax:   (095) 230-2467 
 
Russian Chamber of Commerce and Industry 
Stanislav Alekseyevich Smirnov, President; 
Yuriy Nikolayevich Denissenkov, Head,  
Sergey Borissovich Kulyba, Expert on Accreditation 
  Protocol Department 
6, Ilyinka Ul. 
Moscow 103684 
Phone: (095) 929-02-86, -60, -61, -62, -63 
Fax:   (095) 929-0356 
 
Primorskiy Territory Chamber of Commerce and Industry 
Aleksandr Pisarev, Chairman 
13A, Okeanskiy Prospekt, Vladivostok 
Phone: (4232) 26-96-30 
Fax:   (4232) 22-72-26 
 
Khabarovsk Territory Chamber of Commerce and Industry 
Mikhail Kruglikov, President 
113, Shevronova Ulitsa, Khabarovsk 680000 
Phone: (4212) 33-03-11, 33-11-30 
Fax:   (4212) 33-03-12 
 
Russian Commercial Banks 
 
Please contact the U.S. Commercial Service in Moscow, St. Petersburg and 
Vladivostok for a listing of Russian commercial banks. 
 
U.S. Government Personnel Handling Trade Issues in Russia 
 
U.S. and Foreign Commercial Service, Moscow 
John Peters, Minister Counselor for Commercial Affairs 
15, Novinskiy Bulvar 
Moscow 121099 
Phone: (095) 255-4848, 255-4660 
Fax:   (095) 230-2101 
Satellite telephone: 7 (502) 224-1105 
Satellite fax: 7 (502) 224-1106 
 
U.S. Embassy, Moscow 
Michael Mozur, Minister Counselor for Economic Affairs 
21, Novinskiy Bulvar 
Moscow 121099 
Phone: (095) 956-4139 
Fax:   (095) 956-4296 
 
U.S. Embassy, Moscow 
Mary Revelt, Minister Counselor for Agricultural Affairs 
21, Novinskiy Bulvar 
Moscow 121099 
Phone: (095) 956 4103 
       (502) 221 1245 
FAX:   (095) 975 2339 
       (502) 224 1356 
 
U.S. Embassy, Moscow 
William Murden, Treasury Attache 
21, Novinskiy Bulvar 
Moscow 121099 
Phone: (095) 956-4258 
Fax:   (095) 956-4296  
 
Federal Aviation Administration (FAA) 
Dennis B. Cooper, Senior Representative 
8, B. Devyatinskiy Per. 
Moscow 121099 
Phone: (095) 956-4036 
Fax:   (095) 956-4293 
 
U.S. Agency for International Development 
Office of Privatization and Economic Restructuring 
Thomas Rishoi, Private Enterprise Officer 
8, B. Devyatinskiy Per. 
Moscow 121099 
Phone: (095) 956-4281 
 
U.S. and Foreign Commercial Service, St. Petersburg 
David Schneider, Principal Commercial Officer 
57, Bolshaya Morskaya Ul. 
St. Petersburg, Russia 
Phone: (812) 110-6656, 110-6727 
Fax:   (812) 110-6479 
Satellite phone: (812) 850-1902 
Satellite fax:   (812) 850-1903 
 
American Business Center, St. Petersburg 
Zhanna Agasiyeva, Assistant Manager 
57, Bolshaya Morskaya Ul. 
St. Petersburg, Russia 
Phone: (812) 110-6042, 110-6271 
Fax:   (812) 311-0794 
Satellite phone: (812) 850-1900 
Satellite fax:   (812) 850-1901 
 
U.S. and Foreign Commercial Service, Vladivostok 
Timothy Smith, Consul for Commercial Affairs 
2, Batareynaya Ul., Vladivostok 
Satellite phone/fax: (509) 851-1211 
Phone: (4232) 25-46-25 
Fax:   (4232) 25-46-61 
 
American Business Center, Vladivostok 
Inna Nazarova, Assistant Manager 
2, Batareynaya Ul., Vladivostok 
Satellite phone/fax: (509) 851-1212 
Phone: (4232) 25-46-25 
Fax: (4232) 25-46-61 
 
U.S. Consulate General in Yekaterinburg 
Jonathan Turak, Commercial/Economic/Political Officer 
AMCONGEN Yekaterinburg 
Department of State 
Washington, D.C. 20512-5890 
Phone: (3432) 564-619 
Fax:   (3432) 564-515 
Phone: (3432) 564-736 (Foreign Commercial Service) 
Telex: 612-696 CONS SU 
Internet: consulat.yekaterinburg@sovcust.sprint.com  
 
Washington-Based USG Contacts for Russia 
 
Overseas Private Investment Corporation 
Nicola Bradley 
Manager, New Independent States, Investment Development 
1100 New York Avenue, N.W. 
Washington, D.C. 20527 
Phone: (202) 336-8618 
Fax: (202) 408-5145 
 
U.S. Trade and Development Agency 
Daniel Stein, Regional Director  
SA-16, Room 301 
Washington, D.C. 20523-1602 
Phone: (703) 875-4357 
Fax: (703) 875-4009 
 
Export-Import Bank 
Mitchell McCauley, Insurance officer 
811 Vermont Avenue, NW 
Washington, DC 20571-0999 
Phone: (202) 566-8190 
Fax: (202) 566-7524 
 
Business Information Service for the Newly-Independent States (BISNIS) 
U.S. Department of Commerce 
Linda Nemec, Director 
Room 7413 
Washington, D.C. 20230 
Phone: (202) 482-4655 
Fax: (202) 482-2293 
 
U.S.- Russia Defense Conversion Committee 
U.S. Department of Commerce 
Bureau of Export Administration 
Dan Hurley, Editor for Russian Defense Business Directories 
Room 3898 
Washington, D.C.  20230 
Phone:  (202) 482-1455 
Fax:  (202) 482-2387 
 
Special American Business Internship 
  Training  Program (SABIT) 
Liesl Duhon, Acting Director 
International Trade Administration 
U.S. Department of Commerce 
Room 3413, Washington, D.C. 20230 
Phone: (202) 377-0073 
Fax: (202) 377-4098 
 
U.S. Department of Commerce Liaison 
to the U.S. Executive Director's Office 
International Bank for Reconstruction and Development 
1818 H Street, N.W. 
Room D-13004 
Washington, D.C.  20433 
Phone:  (202) 458-0118 
Fax:  (202) 477-2967 
 
Office of Multilateral Development Banks 
U.S.& Foreign Commercial Service 
U.S. Department of Commerce 
Room H-1107 
Washington, D.C.  20230 
Phone:  (202) 482-3399 
Fax:  (202) 273-0927 
 
U.S. Department of State 
William Bellis, Economics Officer 
2201 C Street, N.W. 
Washington, D.C. 20520 
Phone: (202) 647-6749 
Fax: (202) 736-4710 
 
U.S. Department of Commerce 
Office of International Operations 
U.S. and Foreign Commercial Service 
Russia/NIS Program Office 
Vivian Spathopoulos, Deputy Director 
Room 1235 
14th & Constitution Ave., N.W. 
Washington, D.C. 20230 
Phone: (202) 482-2902 
Fax: (202) 482-2456 
 
U.S. Department of Commerce 
International Trade Administration 
Russia and Independent States Division 
Jack Brougher, Director 
Room 3318 
Washington, D.C. 20230 
Phone: (202) 482-2354 
Fax: (202) 482-3042 
 
U. S. Agency for International Development 
Washington, D.C. 20523 
Department of State 
Gregory Huger, Director, Office of Privatization and Economic 
Restructuring  
Phone: (202) 736-4410 
 
U.S. Department of Agriculture 
14th St. and Independence Avenue 
Washington, D.C.  20250 
Gordon Nicks, Russian Area Officer 
Phone:  (202) 720-3080 
 
National Association of State Departments of Agriculture 
Richard Kirchhoff, Executive Vice President 
1156 15th Street, N.W. Suite 1020 
Washington, D.C. 20005 
Tel: (202) 296-9680 
Fax: (202) 296-9686 
 
U.S.-Based Multipliers and International Organizations 
with Interests in Russia 
 
U.S.-Russia Business Council 
Eugene K. Lawson, President   
1701 Pennsylvania Ave., N.W. Suite 650 
Washington, D.C. 20006 
Phone: (202) 956-7670 
Fax: (202) 956-7674 
 
Russian-American Chamber of Commerce 
Irene M. Lewis, President 
6200 South Quebec St., Suite 210 
Englewood, Colorado 80111 
Phone: (303) 689-8642 
Fax: (303) 689-8762 
 
World Bank 
Thomas Kelsey, Department of Commerce liaison 
1818 H Street, NW, Washington, DC, 20433 
Phone: (202) 458-0118 
Fax: (202) 458-0118 
 
International Finance Corporation (IFC) 
Mark Constantine 
1850 I Street, NW, Washington, DC 20433 
Phone: (202) 473-9331 
Fax: (202) 676-1513 
Moscow Office:  Roger Gale 
6, Neglinnaya St. 
Tel: 7-095-928-5328 
Fax: 7-095-927-6832 
 
Funds 
 
European Bank for Reconstruction and Development 
One Exchange Square 
London EC2A 2EH United Kingdom 
Sarah Shackelton, Commerce Liaison 
Tel: 011-44-171-338-6569 
Fax: 011-44-171-338-6487 
 
U.S.-Russia Investment Fund 
(formed by merger of Fund for Large Enterprises in Russia and the 
Russian-American Enterprise Fund) 
17 State Street, New York, NY 10004 
Paul Asel, Vice President 
Phone: (212) 668-8391 in New York 
Phone: (095) 929-9888 in Moscow 
Fax: (095) 929-9828 
Satellite phone: 44-81-913-3-382 
 
Paine Webber Russia Partners Fund  
Paine Webber 
1285 Avenue of the Americas 
New York, NY 10019 
Phone: (212) 713-3214 
Fax:   (212) 713-1087 
Mr. Drew Guff, VP 
Equity investments in natural resource-related companies, 
telecommunications, light manufacturing and consumer products and 
services.  OPIC has provided guarantee for this fund. 
 
First Russia NIS Partners Fund 
Baring International Investment Management 
155 Bishopsgate 
London EC2M3XY, England 
Nancy Curtain 
Tel: 011-44-171-214-1708 
Fax: 011-44-171-214-1725 
Equity Investments in natural resource-related companies, 
telecommunications, light manufacturing and consumer products and 
services.  OPIC has provided guarantee for this fund. 
 
Defense Enterprise Fund 
Michael Lehner 
Phone:  (617) 527-3307 
Art Sweeney 
Phone:  (804) 281-2129 
Fax: (804) 281-2245 
(Funding for US-Russian joint ventures in the defense sector.  Funding 
now available for joint ventures in military housing construction and 
defense conversion.) 
 
Appendix F 
 
MARKET RESEARCH  
 
 
List of Available and Upcoming Industry Sector Analyses (ISA's) 
 
AVAILABLE 
 
Automatic Lathes -- October 1994 
Avionics -- November 1994 
Paging Telecommunications Equipment -- December 1994 
Non-Industrial Construction Services -- December 1994 
Men's Apparel -- January 1995 
Office Furniture -- February 1995 
Surgical Medical Instruments -- March 1995 
Computer Software -- March 1995 
Hand and Power Tools -- March 1995 
Port and Shipbuilding in Northwest Russia - May 1995 
Forestry and Woodworking Machinery (Far East) -- May 1995 
Industrial Process Controls -- June 1995 
 
UPCOMING 
 
Paper and Paper Products -- July 1995  
Medical Equipment (Far East) -- July 1995 
Food Processing and Packaging Equipment (Far East) -- July 1995 
Shipbuilding Equipment (Far East) -- July 1995 
Hotel and Restaurant Equipment (NW Russia) -- September 1995 
Cosmetics -- September 1995 
Telecom Services Infrastructure -- September 1995 
Air Traffic Controls -- September 1995 
Environmental Equipment and Services (contract) -- September 1995 
Equipment and Services for Upgrading/Refurbishment of Power  
Generation Facilities -- September 1995  
Bakery Equipment -- October 1995 
General Aviation -- November 1995 
Dental Equipment -- December 1995 
Office Supplies -- January 1996 
Children's Apparel -- January 1996 
Computer Services -- February 1996 
Building Products -- March 1996 
Consumer Goods -- March 1996 
Water Pollution Control Equipment -- April 1996 
Household Consumer Goods -- May 1996 
Commercial Fishing Equipment -- June 1996 
Heavy Construction Machinery -- July 1996  
Electrical Generating Equipment -- July 1996 
Automotive Accessories and Service Equipment -- August 1996 
 
LIST OF USDA/FAS Commodity Reports and Market Briefs (FY1995 [as of June 
1, 1995] and FY1996) 
 
Oilseed and Products (annual) - June 1, 1995 
Cotton (annual) - June 20, 1995 
Poultry (annual) - June 20, 1995 
Annual Marketing Plan Information Report - July 15, 1995 
Livestock (annual) - August 1, 1995 
Honey (annual) - August 25, 1995 
Fresh Deciduous Fruit (annual) - September 10, 1995 
Seafood (annual) - September 15, 1995 
Agricultural Situation (annual) - September 30, 1995 
Sugar (semi-annual) - October 10, 1995 
Foreign Buyer List Annual Report - October 15, 1995 
Dairy (annual) - November 30, 1995 
Livestock (semi-annual) - February 10, 1996 
Planting Seeds (annual) - February 10, 1996 
Forest Products (annual) - February 15, 1996 
Sugar (annual) - April 10, 1996 
Tobacco (annual) - May 1, 1996 
Oilseeds and Products (annual) - June 1, 1996 
Cotton (annual) - June 20, 1996 
Poultry (annual) - June 20, 1996 
Annual Marketing Plan Information Report (annual) - July 15, 1996 
Livestock (annual) - August 1, 1996 
Honey (annual) - August 25, 1996 
Fresh Deciduous Fruit (annual) - September 10, 1996 
Seafood (annual) - September 15, 1996 
Agricultural Situation Report - September 30, 1996  
 
Appendix G 
 
TRADE EVENT SCHEDULE; MAJOR TRADE SHOWS IN RUSSIA 
 
COMTEK AUTUMN '95 - October, 1995, St. Petersburg 
Computers and Communications 
Organizer: Comtek International 
43 Danbury Road 
Wilton, Connecticut 06897 
Phone: (203) 834-1122 
Fax: (203) 762-0773 
 
NIZHNY NOVGOROD AUTUMN - October, 1995, Nizhny Novgorod 
International trade fair for consumer goods 
Organizer: Nizhegorodskaya Yarmarka JSC 
13, Sovnarkomovskaya Ul. 
Nizhniy Novgorod, Russia 603086 
Phone: (8312) 44-12-58, 44-03-81, 44-44-55 
Fax: (8312) 44-34-04, 44-01-46 
Telex: 151000 INTUR SU; 151145  
 
URAL-MEDIKA '95 - October 10-14, 1995, Chelyabinsk 
1st International Exhibition of Hospitals, Clinics and Diagnostic 
Centers, Pharmaceuticals and Medical Equipment 
Organizer: PM EXPO AG Messeorganisationen (Switzerland) 
Stockackerstrasse 30 
CH-4142 Munchenstein 
Phone: 41-61-411 66 06 
Fax: 41-61-411 66 09 
Telex: 964041 pmex ch 
 
FALL IN KHABAROVSK- October 12-16, 1995, Khabarovsk 
International Trade Show for Consumer Goods, Clothes and Sporting Goods 
Organizer: Khabarovsk International Fair 
Khabarovsk, Russia 680028 
Rooms 14-18, South Tribune, Lenin Stadium 
Phone: 7-4212-332-020, 332-040, 399-373 
 
INTERAVTO-95, October 17-21, 1995, St. Petersburg 
International Auto Salon 
Organizer: LENEXPO  
Phone: (812) 355-5988 
Fax: (812) 355-1985 
 
NETCOM '95 - October 23-28, 1995, Moscow 
2nd International Specialized Trade Show for Computer Networks 
Krasnaya Presnya Exhibition Center 
Organizer: COMTEK INTERNATIONAL 
43, Danbury Road 
Wilton, Connecticut 06897 
Phone: (203) 834-1122 
Fax: (203) 762-0773 
and CROCUS International   
Phone in Russia: 7-095-249-8606 
FAX: 7-095-249-8611 
 
BANK AND OFFICE '95 - October 23-28, 1995, Moscow 
5th International Trade Show for Banking Equipment 
Krasnaya Presnya Exhibition Center, pavilion 2 
ORGANIZER: NOWEA INTERNATIONAL GMBH 
P.O. Box 101006 
D-40001 Dusseldorf 
Germany 
Phone: (211) 45-60-02 
Fax: (211) 45-60-740; and  
EXPOCENTR 
1-a, Sokolnicheskiy Val 
Moscow 107113 Russia 
Phone: 7-095-268-1340, -255-3712 
Fax: 7-095-288-9537, 205-6055 
 
PAN-PACIFIC CONSUMEXPO '95 - October 24-28, 1995, Vladivostok 
International Fair for consumer goods, house hold and office electronics 
Organizer: VLADEXPO Exhibition Hall 
19, Okeanskiy Prospekt 
Vladivostok, Russia 690600 
Phone: (4232) 22-20-25, 26-76-46  
Fax: (4232) 22-72-26 
 
INTERSTROY '95 - October 31 - November 1, 1995, St. Petersburg 
Construction Equipment and Materials 
Organizer: LENEXPO 
Phone: 7-812-356-3587 
Fax: 7-812-355-1985 
 
WORLD FOOD '95 - November 13-18, 1995, Moscow 
4th International Food, Food Processing and Packaging Exhibition and 
Conference 
U.S. Department of Commerce Certified Trade Fair 
Organizer: EXPOCENTR and COMTEK INTERNATIONAL (USA) (see above) 
 
ENERGETICS AND ENGINEERING ECOLOGY '95 - November 24-28, 1995, 
Vladivostok (Equipment and technologies for environmentally-safe power 
generation and use, energy-efficient construction, and use of recycled 
energy and other natural resources) 
Organizer: VLADEXPO Exhibition Hall 
19, Okeansky Prospect 
Vladivostok, Russia 690600 
Phone: 7-4232-22-20-25, 26-76-46 
Fax: 7-4232- 22-72-26 
 
SDRAVOOKHRANENIYE/HEALTH CARE '95 - December 4-9, 1995, Moscow 
6th International Trade Show for Medical Engineering, Pharmaceuticals 
and Health Care Products 
Organizer: NOWEA INTERNATIONAL GMBH (see above) 
and EXPOCENTR, Firm MEZHVYSTAVKA 
14, Krasnopresnenskaya Nab. 
Moscow, Russia 123100 
Phone: 7-095-255-3738 
Fax: 7-095-205-6055 
 
CONSUMEXPO '96 - January 15-19, 1996, Moscow 
Organizer: NOWEA INTERNATIONAL GMBH  
and MEZHVYSTAVKA, EXPOCENTR (see above) 
 
INFORMATION TECHNOLOGY '96 - March, 1996, Yekaterinburg 
Computers and Software, Information systems 
Organizer: URALEXPOCENTRE 
18, Komsomolskaya Ul. 
GSP 166, Yekaterinburg, Russia 620219 
Phone: (3432) 49 30 17 
Fax: (3432) 49 30 19 
Telex: 721705 
 
MODA '96, March, 1996, Moscow 
International Fashion Show 
(likely to be certified by USDOC) 
Organizer: COMTEK INTERNATIONAL 
43, Danbury Road 
Wilton, Connecticut 06897 
Phone: (203) 834-1122 
Fax: (203) 762-0773 
 
COMTEK '96 - April, 1996, Moscow 
International trade fair for computer systems, peripherals and software;  
(likely to be certified by USDOC) 
Organizer: COMTEK INTERNATIONAL 
43 Danbury Road 
Wilton, Connecticut 06897 
Phone: (203) 834-1122 
Fax: (203) 762-0773 
 
URALS ECOLOGY '96 - April, 1996, Yekaterinburg 
Environmental control and protection equipment, equipment for waste 
treatment 
Organizer: URALEXPOCENTRE (see above) 
 
DALPHARM  '96 - April 18-22, 1996, Vladivostok 
Drugs and pharmaceuticals 
Organizer: VLADEXPO 
VLADEXPO Exhibition Hall 
19, Okeansky Prospect 
Vladivostok, Russia 690600 
Phone: 7-4232-22-20-25, 26-76-46 
Fax: 7-4232- 22-72-26 
 
MEDICINE '96 - May, 1996, Yekaterinburg 
Medical equipment, medical and dental supplies 
Organizer: URALEXPOCENTRE 
18, Komsomolskaya Ul. 
GSP 166, Yekaterinburg, Russia 620219 
Phone: (3432) 49 30 17 
Fax: (3432) 49 30 19 
Telex: 721705 
 
CONSUMER GOODS '96, May, 1996, Ufa 
Organizer: UFAEXPO 
Phone: (3472) 52-54-98, 52-53-86 
Fax: (3472) 52-55-93 
Telex: 162125 PTB SU Expo 
 
TRANSTEC '96 - May, 1996, St. Petersburg 
Organizer: Dolphin Exhibitions Ltd. 
Phone: 44-449-741 087 
Fax: 44-449-741-628  
and LENEXPO 
Phone: 7-812-356-3561 
Fax: 7-812-355-1985 
 
SVYAZ/EXPOCOMM '96 - May, 1996, Moscow 
International Trade Fair for Telecommunications 
(likely to be certified by USDOC) 
Organizer: EXPOCENTR and 
E.J. Krause & Associates, Inc. 
7315 Wisconsin Avenue, Suite 420 East 
Bethesda, MD 20814 
Phone: 301-986-7800 
Fax: 301-986-4538 
Telex: 4944944 EJK EXPO 
 
CONSTRUCTION '96 - May 23-28, 1996, Vladivostok 
Construction equipment and materials 
Organizer: VLADEXPO Exhibition Hall (see above) 
 
CEM/IHHM/PWM '96 (Consumer Electronics/Housewares and 
Hardware/Photographic Equipment), June, 1996, Moscow 
(likely to be certified by USDOC) 
Organizer: COMTEK INTERNATIONAL (see above) 
 
DEFENSE CONVERSION ' 96, June, 1996, Yekaterinburg 
Organizer: URALEXPOCENTRE (see above) 
 
AUTOMOBILE SHOW '96 - June, 1996, Yekaterinburg 
Organizer: URALEXPOCENTRE (see above) 
 
INTERNATIONAL COMPUTER FORUM - June, 1996, Moscow 
7th International Conference and Trade Show for Computers 
Organizer: International Computer Club 
Office 506A, Entrance 3 
12, Krasnopresnenskaya Nab. 
Moscow Russia 123610 
Phone: 7-095-253-9123, 253-9124 
Fax: 7-095-253-9102 
 
MACHINEXPO-95 - June 7-13, 1995, Moscow 
3rd International Technical Machinery Fair 
Organizer: MEZHVYSTAVKA, EXPOCENTR (see above) 
 
NEFTEGAZ '96 - June 17-22, 1996, Moscow 
6th International Fair for equipment for the oil and gas industry; 
(likely to be certified by USDOC) 
Organizers: MEZHVYSTAVKA, EXPOCENTR (see above) 
NOWEA INTERNATIONAL GMBH 
P.O. Box 101006 
D-40001 Dusseldorf 
Germany 
Phone: (211) 45-60-02 
Fax: (211) 45-60-740 
 
BYT I MODA/Consumer Goods and Fashion Show, July 2-6, Moscow 
4th International Trade Fair 
Organizer: NOWEA INTERNATIONAL GMBH (see above)  
 
BANK AND OFFICE '96 - August, 1996, Vladivostok 
Bank and office equipment and furniture 
Organizer: VLADEXPO Exhibition Hall (see above) 
 
INTERNATIONAL AVIATION AND SPACE SALON '96 - August, 1996, Moscow 
Zhukovsky Airfield, Moscow Region; 
U.S. Department of Commerce Certified Trade Fair 
Organizer: Global Tradeshow Services, Inc. 
P.O. Box 1247 
Springfield, VA 22151-0247 
Phone: (703) 941-2420  
Fax: (703) 941-1480 
in Europe: Gebr. Helbig Industrie-Messen GmbH 
P.O. Box 1580 
D-92605 Weiden, Germany 
Phone: 961-388-1122 
Fax: 961-388-1130 
 
AVTOSALON-96 - August, 1996, Moscow 
3d Russian International Automobile Salon 
Organizer: MEZHVYSTAVKA, EXPOCENTR (see above) 
(likely to be certified by U.S. Department of Commerce) 
 
SECURITY '96 - August, 1996, Vladivostok 
Security equipment 
Organizer: VLADEXPO Exhibition Hall (see above) 
 
RUSSIAN FARMER - September, 1996, St. Petersburg 
5th Agricultural World Trade Fair 
Organizer: LENEXPO 
Phone: (812) 356-3561 
Fax: (812) 355-1985 
 
TECHNOLES '96 - September, 1996, St. Petersburg 
Machinery and Equipment for Forestry 
Organizer: LENEXPO 
Phone: 7-812-355-1946 
Fax: 7-812-355-1985 
 
INTERMEBEL '96 - September, 1996, St. Petersburg 
Furniture 
Organizer: LENEXPO 
Phone: 7-812-355-1946 
Fax: 7-812-355-1985 
 
COMMUNICATION, INFORMATION TECHNOLOGIES '96 - September, Ufa 
Organizer: UFAEXPO (see above) 
 
STROITECHNIKA '96 - September 2-6, 1996, Moscow 
International Trade Fair for Construction Industry 
Organizer: EXPOCENTR and NOWEA INTERNATIONAL GMBH 
P.O. Box 101006 
D-40001 Dusseldorf 
Germany 
Phone: (211) 45-60-02 
Fax: (211) 45-60-740 
 
TRANSPORT, ROADS AND SERVICE '96 - September 18-23, 1996, Vladivostok  
Transportation and construction equipment and products 
Organizer: VLADEXPO (see above) 
 
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